Correlation Between Toromont Industries and Thomson Reuters

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

By analyzing existing cross correlation between Toromont Industries and Thomson Reuters Corp, you can compare the effects of market volatilities on Toromont Industries and Thomson Reuters 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 Thomson Reuters. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toromont Industries and Thomson Reuters.

Diversification Opportunities for Toromont Industries and Thomson Reuters

0.24

Correlation Coefficient

Toromont Industries  Thomson Reuters

Modest diversification

The 3 months correlation between Toromont and Thomson is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Toromont Industries and Thomson Reuters Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thomson Reuters Corp 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 Thomson Reuters. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thomson Reuters Corp has no effect on the direction of Toromont Industries i.e., Toromont Industries and Thomson Reuters go up and down completely randomly.

Pair Corralation between Toromont Industries and Thomson Reuters

Assuming the 90 days trading horizon Toromont Industries is expected to under-perform the Thomson Reuters. In addition to that, Toromont Industries is 1.12 times more volatile than Thomson Reuters Corp. It trades about -0.06 of its total potential returns per unit of risk. Thomson Reuters Corp is currently generating about 0.01 per unit of volatility. If you would invest  22,716  in Thomson Reuters Corp on September 2, 2024 and sell it today you would earn a total of  128.00  from holding Thomson Reuters Corp or generate 0.56% return on investment over 90 days.

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

Toromont Industries  vs.  Thomson Reuters Corp

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 very healthy technical indicators, Toromont Industries is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Thomson Reuters Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Thomson Reuters Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Thomson Reuters is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Toromont Industries and Thomson Reuters

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

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