Correlation Between Tootsie Roll and Seaboard

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

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

Diversification Opportunities for Tootsie Roll and Seaboard

-0.33

Correlation Coefficient

Tootsie Roll  Seaboard

Very good diversification

The 3 months correlation between Tootsie and Seaboard is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Tootsie Roll Industries and Seaboard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seaboard and Tootsie Roll 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 Tootsie Roll Industries are associated (or correlated) with Seaboard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seaboard has no effect on the direction of Tootsie Roll i.e., Tootsie Roll and Seaboard go up and down completely randomly.

Pair Corralation between Tootsie Roll and Seaboard

Allowing for the 90-day total investment horizon Tootsie Roll Industries is expected to generate 1.07 times more return on investment than Seaboard. However, Tootsie Roll is 1.07 times more volatile than Seaboard. It trades about -0.03 of its potential returns per unit of risk. Seaboard is currently generating about -0.06 per unit of risk. If you would invest  4,167  in Tootsie Roll Industries on September 3, 2024 and sell it today you would lose (866.00) from holding Tootsie Roll Industries or give up 20.78% of portfolio value over 90 days.

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

Tootsie Roll Industries  vs.  Seaboard

Tootsie Roll Industries

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tootsie Roll Industries are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Tootsie Roll may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Seaboard

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seaboard has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Tootsie Roll and Seaboard

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

The idea behind Tootsie Roll Industries and Seaboard 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.