Correlation Between Arrow Financial and Toro

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

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

Diversification Opportunities for Arrow Financial and Toro

0.05

Correlation Coefficient

Arrow Financial  Toro

Significant diversification

The 3 months correlation between Arrow and Toro is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Financial and Toro Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toro and Arrow Financial 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 Arrow Financial 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 Arrow Financial i.e., Arrow Financial and Toro go up and down completely randomly.

Pair Corralation between Arrow Financial and Toro

Given the investment horizon of 90 days Arrow Financial is expected to generate 1.35 times more return on investment than Toro. However, Arrow Financial is 1.35 times more volatile than Toro Co. It trades about 0.09 of its potential returns per unit of risk. Toro Co is currently generating about -0.03 per unit of risk. If you would invest  2,920  in Arrow Financial on September 2, 2024 and sell it today you would earn a total of  378.00  from holding Arrow Financial or generate 12.95% return on investment over 90 days.

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

Arrow Financial  vs.  Toro Co

Arrow Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arrow Financial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Arrow Financial showed solid returns over the last few months and may actually be approaching a breakup point.

Toro

Risk-Adjusted Performance

0 of 100

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 rather sound basic indicators, Toro is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Arrow Financial and Toro

The main advantage of trading using opposite Arrow Financial and Toro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arrow Financial 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 Arrow Financial and Toro Co 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..