Correlation Between George Weston and Toromont Industries

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

By analyzing existing cross correlation between George Weston Limited and Toromont Industries, you can compare the effects of market volatilities on George Weston and Toromont Industries 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 George Weston with a short position of Toromont Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of George Weston and Toromont Industries.

Diversification Opportunities for George Weston and Toromont Industries

-0.29

Correlation Coefficient

George Weston  Toromont Industries

Very good diversification

The 3 months correlation between George and Toromont is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding George Weston Limited and Toromont Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toromont Industries and George Weston 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 George Weston Limited are associated (or correlated) with Toromont Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toromont Industries has no effect on the direction of George Weston i.e., George Weston and Toromont Industries go up and down completely randomly.

Pair Corralation between George Weston and Toromont Industries

Assuming the 90 days horizon George Weston is expected to generate 2.66 times less return on investment than Toromont Industries. In addition to that, George Weston is 1.09 times more volatile than Toromont Industries. It trades about 0.04 of its total potential returns per unit of risk. Toromont Industries is currently generating about 0.11 per unit of volatility. If you would invest  11,352  in Toromont Industries on December 1, 2024 and sell it today you would earn a total of  795.00  from holding Toromont Industries or generate 7.0% return on investment over 90 days.

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

George Weston Limited  vs.  Toromont Industries

George Weston Limited

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in George Weston Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, George Weston is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Toromont Industries

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Toromont Industries are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, Toromont Industries may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with George Weston and Toromont Industries

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

The idea behind George Weston Limited and Toromont Industries 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.