Correlation Between Toro and Timken

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

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

Diversification Opportunities for Toro and Timken

0.24

Correlation Coefficient

Toro  Timken

Modest diversification

The 3 months correlation between Toro and Timken is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Toro Co and Timken Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timken Company 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 Timken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timken Company has no effect on the direction of Toro i.e., Toro and Timken go up and down completely randomly.

Pair Corralation between Toro and Timken

Considering the 90-day investment horizon Toro Co is expected to under-perform the Timken. In addition to that, Toro is 1.05 times more volatile than Timken Company. It trades about -0.07 of its total potential returns per unit of risk. Timken Company is currently generating about 0.04 per unit of volatility. If you would invest  7,118  in Timken Company on December 27, 2024 and sell it today you would earn a total of  261.00  from holding Timken Company or generate 3.67% return on investment over 90 days.

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

Toro Co  vs.  Timken Company

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.

Timken Company

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Timken Company are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking signals, Timken is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Toro and Timken

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

The idea behind Toro Co and Timken Company 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 Commodity Directory module to find actively traded commodities issued by global exchanges.