Correlation Between Toro Energy and Aritzia

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

By analyzing existing cross correlation between Toro Energy Limited and Aritzia, you can compare the effects of market volatilities on Toro Energy and Aritzia 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 Toro Energy with a short position of Aritzia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toro Energy and Aritzia.

Diversification Opportunities for Toro Energy and Aritzia

-0.63

Correlation Coefficient

Toro Energy  Aritzia

Excellent diversification

The 3 months correlation between Toro and Aritzia is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Toro Energy Limited and Aritzia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aritzia and Toro Energy 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 Toro Energy Limited are associated (or correlated) with Aritzia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aritzia has no effect on the direction of Toro Energy i.e., Toro Energy and Aritzia go up and down completely randomly.

Pair Corralation between Toro Energy and Aritzia

Assuming the 90 days horizon Toro Energy Limited is expected to under-perform the Aritzia. In addition to that, Toro Energy is 4.04 times more volatile than Aritzia. It trades about -0.47 of its total potential returns per unit of risk. Aritzia is currently generating about 0.34 per unit of volatility. If you would invest  3,282  in Aritzia on September 24, 2024 and sell it today you would earn a total of  483.00  from holding Aritzia or generate 14.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	90.0%
Values	Daily Returns

Toro Energy Limited  vs.  Aritzia

Toro Energy Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Toro Energy Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Toro Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Aritzia

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aritzia are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aritzia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Toro Energy and Aritzia

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

The idea behind Toro Energy Limited and Aritzia 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.