Correlation Between Toromont Industries and Advent Wireless

Can any of the company-specific risk be diversified away by investing in both Toromont Industries and Advent Wireless at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Toromont Industries and Advent Wireless into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Toromont Industries and Advent Wireless, you can compare the effects of market volatilities on Toromont Industries and Advent Wireless and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Toromont Industries with a short position of Advent Wireless. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toromont Industries and Advent Wireless.

Diversification Opportunities for Toromont Industries and Advent Wireless

-0.27

Correlation Coefficient

Toromont Industries  Advent Wireless

Very good diversification

The 3 months correlation between Toromont and Advent is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Toromont Industries and Advent Wireless in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advent Wireless and Toromont Industries is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Toromont Industries are associated (or correlated) with Advent Wireless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advent Wireless has no effect on the direction of Toromont Industries i.e., Toromont Industries and Advent Wireless go up and down completely randomly.

Pair Corralation between Toromont Industries and Advent Wireless

Assuming the 90 days trading horizon Toromont Industries is expected to generate 0.39 times more return on investment than Advent Wireless. However, Toromont Industries is 2.57 times less risky than Advent Wireless. It trades about 0.1 of its potential returns per unit of risk. Advent Wireless is currently generating about -0.13 per unit of risk. If you would invest  11,308  in Toromont Industries on December 4, 2024 and sell it today you would earn a total of  740.00  from holding Toromont Industries or generate 6.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Toromont Industries  vs.  Advent Wireless

Toromont Industries

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Toromont Industries are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, Toromont Industries may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Advent Wireless

Risk-Adjusted Performance

Very Weak

Over the last 90 days Advent Wireless has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Toromont Industries and Advent Wireless

The main advantage of trading using opposite Toromont Industries and Advent Wireless positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toromont Industries position performs unexpectedly, Advent Wireless can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Advent Wireless will offset losses from the drop in Advent Wireless' long position.

The idea behind Toromont Industries and Advent Wireless pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.