Correlation Between Toromont Industries and Prysmian SpA

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

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

Diversification Opportunities for Toromont Industries and Prysmian SpA

0.29

Correlation Coefficient

Toromont Industries  Prysmian SpA

Modest diversification

The 3 months correlation between Toromont and Prysmian is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Toromont Industries and Prysmian SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prysmian SpA 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 Prysmian SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prysmian SpA has no effect on the direction of Toromont Industries i.e., Toromont Industries and Prysmian SpA go up and down completely randomly.

Pair Corralation between Toromont Industries and Prysmian SpA

Assuming the 90 days horizon Toromont Industries is expected to generate 0.41 times more return on investment than Prysmian SpA. However, Toromont Industries is 2.43 times less risky than Prysmian SpA. It trades about 0.03 of its potential returns per unit of risk. Prysmian SpA is currently generating about -0.05 per unit of risk. If you would invest  7,926  in Toromont Industries on December 28, 2024 and sell it today you would earn a total of  172.00  from holding Toromont Industries or generate 2.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Toromont Industries  vs.  Prysmian SpA

Toromont Industries

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Toromont Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Prysmian SpA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Prysmian SpA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's primary indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Toromont Industries and Prysmian SpA

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

The idea behind Toromont Industries and Prysmian SpA 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.