Correlation Between Toro and Global Net

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

By analyzing existing cross correlation between Toro Co and Global Net Lease, you can compare the effects of market volatilities on Toro and Global Net 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 Global Net. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toro and Global Net.

Diversification Opportunities for Toro and Global Net

0.43

Correlation Coefficient

Toro  Global Net

Very weak diversification

The 3 months correlation between Toro and Global is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Toro Co and Global Net Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Net Lease 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 Global Net. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Net Lease has no effect on the direction of Toro i.e., Toro and Global Net go up and down completely randomly.

Pair Corralation between Toro and Global Net

Considering the 90-day investment horizon Toro Co is expected to under-perform the Global Net. But the stock apears to be less risky and, when comparing its historical volatility, Toro Co is 1.17 times less risky than Global Net. The stock trades about -0.08 of its potential returns per unit of risk. The Global Net Lease is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,322  in Global Net Lease on October 9, 2024 and sell it today you would lose (14.00) from holding Global Net Lease or give up 0.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.5%
Values	Daily Returns

Toro Co  vs.  Global Net Lease

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.

Global Net Lease

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Global Net Lease are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Global Net is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Toro and Global Net

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

The idea behind Toro Co and Global Net Lease 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.