Correlation Between Toro and Axalta Coating

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

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

Diversification Opportunities for Toro and Axalta Coating

0.01

Correlation Coefficient

Toro  Axalta Coating

Significant diversification

The 3 months correlation between Toro and Axalta is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Toro Co and Axalta Coating Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axalta Coating Systems and Toro 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 Co are associated (or correlated) with Axalta Coating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axalta Coating Systems has no effect on the direction of Toro i.e., Toro and Axalta Coating go up and down completely randomly.

Pair Corralation between Toro and Axalta Coating

Considering the 90-day investment horizon Toro Co is expected to under-perform the Axalta Coating. In addition to that, Toro is 1.06 times more volatile than Axalta Coating Systems. It trades about -0.03 of its total potential returns per unit of risk. Axalta Coating Systems is currently generating about 0.12 per unit of volatility. If you would invest  3,574  in Axalta Coating Systems on September 3, 2024 and sell it today you would earn a total of  472.00  from holding Axalta Coating Systems or generate 13.21% return on investment over 90 days.

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

Toro Co  vs.  Axalta Coating Systems

Toro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toro Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Toro is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Axalta Coating Systems

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Axalta Coating Systems are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Axalta Coating sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Toro and Axalta Coating

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

The idea behind Toro Co and Axalta Coating Systems 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.