Correlation Between Toromont Industries and Halma Plc

Can any of the company-specific risk be diversified away by investing in both Toromont Industries and Halma Plc 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 Halma Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Toromont Industries and Halma plc, you can compare the effects of market volatilities on Toromont Industries and Halma Plc 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 Halma Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toromont Industries and Halma Plc.

Diversification Opportunities for Toromont Industries and Halma Plc

0.07

Correlation Coefficient

Toromont Industries  Halma Plc

Significant diversification

The 3 months correlation between Toromont and Halma is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Toromont Industries and Halma plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Halma plc 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 Halma Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Halma plc has no effect on the direction of Toromont Industries i.e., Toromont Industries and Halma Plc go up and down completely randomly.

Pair Corralation between Toromont Industries and Halma Plc

Assuming the 90 days horizon Toromont Industries is expected to generate 2.26 times less return on investment than Halma Plc. In addition to that, Toromont Industries is 1.28 times more volatile than Halma plc. It trades about 0.02 of its total potential returns per unit of risk. Halma plc is currently generating about 0.05 per unit of volatility. If you would invest  2,507  in Halma plc on September 12, 2024 and sell it today you would earn a total of  954.00  from holding Halma plc or generate 38.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	60.19%
Values	Daily Returns

Toromont Industries  vs.  Halma plc

Toromont Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toromont Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Toromont Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Halma plc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Halma plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Halma Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Toromont Industries and Halma Plc

The main advantage of trading using opposite Toromont Industries and Halma Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toromont Industries position performs unexpectedly, Halma Plc 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 Halma Plc will offset losses from the drop in Halma Plc's long position.

The idea behind Toromont Industries and Halma plc 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.

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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.