Correlation Between Freedom Bank and Toro

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Can any of the company-specific risk be diversified away by investing in both Freedom Bank 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 Freedom Bank and Toro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Freedom Bank of and Toro Co, you can compare the effects of market volatilities on Freedom Bank 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 Freedom Bank with a short position of Toro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freedom Bank and Toro.

Diversification Opportunities for Freedom Bank and Toro

0.47
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Freedom and Toro is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Freedom Bank of and Toro Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toro and Freedom Bank 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 Freedom Bank of 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 Freedom Bank i.e., Freedom Bank and Toro go up and down completely randomly.

Pair Corralation between Freedom Bank and Toro

Given the investment horizon of 90 days Freedom Bank of is expected to generate 0.51 times more return on investment than Toro. However, Freedom Bank of is 1.95 times less risky than Toro. It trades about 0.01 of its potential returns per unit of risk. Toro Co is currently generating about -0.02 per unit of risk. If you would invest  1,050  in Freedom Bank of on September 25, 2024 and sell it today you would earn a total of  10.00  from holding Freedom Bank of or generate 0.95% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy83.06%
ValuesDaily Returns

Freedom Bank of  vs.  Toro Co

 Performance 
       Timeline  
Freedom Bank 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Freedom Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Freedom Bank is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.
Toro 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.

Freedom Bank and Toro Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Freedom Bank and Toro

The main advantage of trading using opposite Freedom Bank and Toro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freedom Bank 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 Freedom Bank of 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.
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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