Correlation Between MYR and Toro

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

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

Diversification Opportunities for MYR and Toro

0.2

Correlation Coefficient

MYR  Toro

Modest diversification

The 3 months correlation between MYR and Toro is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding MYR Group and Toro Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toro and MYR 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 MYR Group 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 MYR i.e., MYR and Toro go up and down completely randomly.

Pair Corralation between MYR and Toro

Given the investment horizon of 90 days MYR Group is expected to generate 1.72 times more return on investment than Toro. However, MYR is 1.72 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 -0.28 per unit of risk. If you would invest  15,967  in MYR Group on September 26, 2024 and sell it today you would lose (737.00) from holding MYR Group or give up 4.62% of portfolio value over 90 days.

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

MYR Group  vs.  Toro Co

MYR Group

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MYR Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, MYR reported 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 MYR and Toro

The main advantage of trading using opposite MYR and Toro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MYR 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 MYR Group 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.