Correlation Between Toro and Snap On

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

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

Diversification Opportunities for Toro and Snap On

0.77

Correlation Coefficient

Toro  Snap On

Poor diversification

The 3 months correlation between Toro and Snap is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Toro Co and Snap On in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snap On 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 Snap On. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snap On has no effect on the direction of Toro i.e., Toro and Snap On go up and down completely randomly.

Pair Corralation between Toro and Snap On

Considering the 90-day investment horizon Toro Co is expected to under-perform the Snap On. In addition to that, Toro is 1.45 times more volatile than Snap On. It trades about -0.07 of its total potential returns per unit of risk. Snap On is currently generating about -0.02 per unit of volatility. If you would invest  34,447  in Snap On on December 26, 2024 and sell it today you would lose (771.00) from holding Snap On or give up 2.24% of portfolio value over 90 days.

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

Toro Co  vs.  Snap On

Toro

Risk-Adjusted Performance

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 latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Snap On

Risk-Adjusted Performance

Very Weak

Over the last 90 days Snap On has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Snap On is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Toro and Snap On

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

The idea behind Toro Co and Snap On 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.