Correlation Between TOMI Environmental and Butler National

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

By analyzing existing cross correlation between TOMI Environmental Solutions and Butler National Corp, you can compare the effects of market volatilities on TOMI Environmental and Butler National 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 TOMI Environmental with a short position of Butler National. Check out your portfolio center. Please also check ongoing floating volatility patterns of TOMI Environmental and Butler National.

Diversification Opportunities for TOMI Environmental and Butler National

0.48

Correlation Coefficient

TOMI Environmental  Butler National

Very weak diversification

The 3 months correlation between TOMI and Butler is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding TOMI Environmental Solutions and Butler National Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Butler National Corp and TOMI Environmental 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 TOMI Environmental Solutions are associated (or correlated) with Butler National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Butler National Corp has no effect on the direction of TOMI Environmental i.e., TOMI Environmental and Butler National go up and down completely randomly.

Pair Corralation between TOMI Environmental and Butler National

Given the investment horizon of 90 days TOMI Environmental Solutions is expected to under-perform the Butler National. In addition to that, TOMI Environmental is 1.67 times more volatile than Butler National Corp. It trades about -0.01 of its total potential returns per unit of risk. Butler National Corp is currently generating about 0.01 per unit of volatility. If you would invest  179.00  in Butler National Corp on December 25, 2024 and sell it today you would lose (2.00) from holding Butler National Corp or give up 1.12% of portfolio value over 90 days.

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

TOMI Environmental Solutions  vs.  Butler National Corp

TOMI Environmental

Risk-Adjusted Performance

Insignificant

Over the last 90 days TOMI Environmental Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, TOMI Environmental is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Butler National Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Butler National Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward-looking signals, Butler National is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with TOMI Environmental and Butler National

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

The idea behind TOMI Environmental Solutions and Butler National Corp 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.