Correlation Between Wabash National and Toro

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

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

Diversification Opportunities for Wabash National and Toro

-0.6

Correlation Coefficient

Wabash National  Toro

Excellent diversification

The 3 months correlation between Wabash and Toro is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Wabash National and Toro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toro and Wabash National 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 Wabash National are associated (or correlated) with Toro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toro has no effect on the direction of Wabash National i.e., Wabash National and Toro go up and down completely randomly.

Pair Corralation between Wabash National and Toro

Considering the 90-day investment horizon Wabash National is expected to under-perform the Toro. But the stock apears to be less risky and, when comparing its historical volatility, Wabash National is 2.65 times less risky than Toro. The stock trades about -0.28 of its potential returns per unit of risk. The Toro is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  267.00  in Toro on October 26, 2024 and sell it today you would earn a total of  32.00  from holding Toro or generate 11.99% return on investment over 90 days.

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

Wabash National  vs.  Toro

Wabash National

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wabash National has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Toro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toro has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Toro is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Wabash National and Toro

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

The idea behind Wabash National and Toro 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.