Correlation Between Toro and New Horizon

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

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

Diversification Opportunities for Toro and New Horizon

-0.32

Correlation Coefficient

Toro  New Horizon

Very good diversification

The 3 months correlation between Toro and New is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Toro Co and New Horizon Aircraft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Horizon Aircraft 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 New Horizon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Horizon Aircraft has no effect on the direction of Toro i.e., Toro and New Horizon go up and down completely randomly.

Pair Corralation between Toro and New Horizon

Considering the 90-day investment horizon Toro Co is expected to under-perform the New Horizon. But the stock apears to be less risky and, when comparing its historical volatility, Toro Co is 20.83 times less risky than New Horizon. The stock trades about -0.31 of its potential returns per unit of risk. The New Horizon Aircraft is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  3.99  in New Horizon Aircraft on October 11, 2024 and sell it today you would earn a total of  2.49  from holding New Horizon Aircraft or generate 62.41% return on investment over 90 days.

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

Toro Co  vs.  New Horizon Aircraft

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.

New Horizon Aircraft

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in New Horizon Aircraft are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, New Horizon showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Toro and New Horizon

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

The idea behind Toro Co and New Horizon Aircraft 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.