Correlation Between MCAN Mortgage and Toromont Industries

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

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

Diversification Opportunities for MCAN Mortgage and Toromont Industries

-0.78

Correlation Coefficient

MCAN Mortgage  Toromont Industries

Pay attention - limited upside

The 3 months correlation between MCAN and Toromont is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding MCAN Mortgage and Toromont Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toromont Industries and MCAN Mortgage 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 MCAN Mortgage 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 MCAN Mortgage i.e., MCAN Mortgage and Toromont Industries go up and down completely randomly.

Pair Corralation between MCAN Mortgage and Toromont Industries

Assuming the 90 days trading horizon MCAN Mortgage is expected to generate 1.16 times more return on investment than Toromont Industries. However, MCAN Mortgage is 1.16 times more volatile than Toromont Industries. It trades about 0.12 of its potential returns per unit of risk. Toromont Industries is currently generating about -0.2 per unit of risk. If you would invest  1,720  in MCAN Mortgage on September 15, 2024 and sell it today you would earn a total of  159.00  from holding MCAN Mortgage or generate 9.24% return on investment over 90 days.

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

MCAN Mortgage  vs.  Toromont Industries

MCAN Mortgage

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MCAN Mortgage are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, MCAN Mortgage may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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. In spite of unfluctuating performance in the last few months, the Stock's technical indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with MCAN Mortgage and Toromont Industries

The main advantage of trading using opposite MCAN Mortgage and Toromont Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MCAN Mortgage 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 MCAN Mortgage 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.