Correlation Between Toho Co and Rai Way

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

By analyzing existing cross correlation between Toho Co and Rai Way SpA, you can compare the effects of market volatilities on Toho Co and Rai Way 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 Toho Co with a short position of Rai Way. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toho Co and Rai Way.

Diversification Opportunities for Toho Co and Rai Way

0.74

Correlation Coefficient

Toho Co  Rai Way

Poor diversification

The 3 months correlation between Toho and Rai is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Toho Co and Rai Way SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rai Way SpA and Toho Co 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 Toho Co are associated (or correlated) with Rai Way. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rai Way SpA has no effect on the direction of Toho Co i.e., Toho Co and Rai Way go up and down completely randomly.

Pair Corralation between Toho Co and Rai Way

Assuming the 90 days horizon Toho Co is expected to generate 0.87 times more return on investment than Rai Way. However, Toho Co is 1.15 times less risky than Rai Way. It trades about 0.18 of its potential returns per unit of risk. Rai Way SpA is currently generating about 0.08 per unit of risk. If you would invest  3,762  in Toho Co on December 27, 2024 and sell it today you would earn a total of  738.00  from holding Toho Co or generate 19.62% return on investment over 90 days.

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

Toho Co  vs.  Rai Way SpA

Toho Co

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Toho Co are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Toho Co reported solid returns over the last few months and may actually be approaching a breakup point.

Rai Way SpA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rai Way SpA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Rai Way may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Toho Co and Rai Way

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

The idea behind Toho Co and Rai Way 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.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.