Correlation Between TOMI Environmental and Federal Signal

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

Diversification Opportunities for TOMI Environmental and Federal Signal

0.67

Correlation Coefficient

TOMI Environmental  Federal Signal

Poor diversification

The 3 months correlation between TOMI and Federal is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding TOMI Environmental Solutions and Federal Signal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Signal 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 Federal Signal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Signal has no effect on the direction of TOMI Environmental i.e., TOMI Environmental and Federal Signal go up and down completely randomly.

Pair Corralation between TOMI Environmental and Federal Signal

Given the investment horizon of 90 days TOMI Environmental Solutions is expected to generate 2.07 times more return on investment than Federal Signal. However, TOMI Environmental is 2.07 times more volatile than Federal Signal. It trades about -0.03 of its potential returns per unit of risk. Federal Signal is currently generating about -0.1 per unit of risk. If you would invest  102.00  in TOMI Environmental Solutions on December 28, 2024 and sell it today you would lose (14.00) from holding TOMI Environmental Solutions or give up 13.73% of portfolio value over 90 days.

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

TOMI Environmental Solutions  vs.  Federal Signal

TOMI Environmental

Risk-Adjusted Performance

Very Weak

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 latest unfluctuating performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Federal Signal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Federal Signal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with TOMI Environmental and Federal Signal

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

The idea behind TOMI Environmental Solutions and Federal Signal 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.