Correlation Between Toromont Industries and Fastenal

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

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

Diversification Opportunities for Toromont Industries and Fastenal

-0.75

Correlation Coefficient

Toromont Industries  Fastenal

Pay attention - limited upside

The 3 months correlation between Toromont and Fastenal is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Toromont Industries and Fastenal Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fastenal and Toromont Industries 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 Toromont Industries are associated (or correlated) with Fastenal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fastenal has no effect on the direction of Toromont Industries i.e., Toromont Industries and Fastenal go up and down completely randomly.

Pair Corralation between Toromont Industries and Fastenal

Assuming the 90 days horizon Toromont Industries is expected to generate 6.34 times less return on investment than Fastenal. In addition to that, Toromont Industries is 1.19 times more volatile than Fastenal Company. It trades about 0.01 of its total potential returns per unit of risk. Fastenal Company is currently generating about 0.09 per unit of volatility. If you would invest  4,981  in Fastenal Company on September 26, 2024 and sell it today you would earn a total of  2,227  from holding Fastenal Company or generate 44.71% return on investment over 90 days.

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

Toromont Industries  vs.  Fastenal Company

Toromont Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toromont Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Fastenal

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fastenal Company are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Fastenal reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Toromont Industries and Fastenal

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

The idea behind Toromont Industries and Fastenal 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 CEOs Directory module to screen CEOs from public companies around the world.