Correlation Between Tootsie Roll and So Martinho

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

By analyzing existing cross correlation between Tootsie Roll Industries and So Martinho SA, you can compare the effects of market volatilities on Tootsie Roll and So Martinho 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 Tootsie Roll with a short position of So Martinho. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tootsie Roll and So Martinho.

Diversification Opportunities for Tootsie Roll and So Martinho

-0.14

Correlation Coefficient

Tootsie Roll  So Martinho

Good diversification

The 3 months correlation between Tootsie and SMTO3 is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Tootsie Roll Industries and So Martinho SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on So Martinho SA and Tootsie Roll 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 Tootsie Roll Industries are associated (or correlated) with So Martinho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of So Martinho SA has no effect on the direction of Tootsie Roll i.e., Tootsie Roll and So Martinho go up and down completely randomly.

Pair Corralation between Tootsie Roll and So Martinho

Allowing for the 90-day total investment horizon Tootsie Roll Industries is expected to generate 0.68 times more return on investment than So Martinho. However, Tootsie Roll Industries is 1.47 times less risky than So Martinho. It trades about 0.03 of its potential returns per unit of risk. So Martinho SA is currently generating about -0.04 per unit of risk. If you would invest  3,071  in Tootsie Roll Industries on December 19, 2024 and sell it today you would earn a total of  63.00  from holding Tootsie Roll Industries or generate 2.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Tootsie Roll Industries  vs.  So Martinho SA

Tootsie Roll Industries

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tootsie Roll Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Tootsie Roll is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

So Martinho SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days So Martinho SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Tootsie Roll and So Martinho

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

The idea behind Tootsie Roll Industries and So Martinho SA 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.