Correlation Between Toro Energy and Crimson Wine

Can any of the company-specific risk be diversified away by investing in both Toro Energy and Crimson Wine 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 Crimson Wine 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 Crimson Wine, you can compare the effects of market volatilities on Toro Energy and Crimson Wine 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 Crimson Wine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toro Energy and Crimson Wine.

Diversification Opportunities for Toro Energy and Crimson Wine

-0.32

Correlation Coefficient

Toro Energy  Crimson Wine

Very good diversification

The 3 months correlation between Toro and Crimson is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Toro Energy Limited and Crimson Wine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crimson Wine 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 Crimson Wine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crimson Wine has no effect on the direction of Toro Energy i.e., Toro Energy and Crimson Wine go up and down completely randomly.

Pair Corralation between Toro Energy and Crimson Wine

Assuming the 90 days horizon Toro Energy Limited is expected to generate 12.95 times more return on investment than Crimson Wine. However, Toro Energy is 12.95 times more volatile than Crimson Wine. It trades about 0.07 of its potential returns per unit of risk. Crimson Wine is currently generating about -0.14 per unit of risk. If you would invest  10.00  in Toro Energy Limited on December 19, 2024 and sell it today you would earn a total of  1.00  from holding Toro Energy Limited or generate 10.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	52.54%
Values	Daily Returns

Toro Energy Limited  vs.  Crimson Wine

Toro Energy Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Toro Energy Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Toro Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Crimson Wine

Risk-Adjusted Performance

Very Weak

Over the last 90 days Crimson Wine has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Toro Energy and Crimson Wine

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

The idea behind Toro Energy Limited and Crimson Wine 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.