Correlation Between Toro and Beauty Health
Can any of the company-specific risk be diversified away by investing in both Toro and Beauty Health 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 Toro and Beauty Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Toro Co and Beauty Health Co, you can compare the effects of market volatilities on Toro and Beauty Health 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 Toro with a short position of Beauty Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toro and Beauty Health.
Diversification Opportunities for Toro and Beauty Health
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Toro and Beauty is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Toro Co and Beauty Health Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beauty Health and Toro 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 Toro Co are associated (or correlated) with Beauty Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beauty Health has no effect on the direction of Toro i.e., Toro and Beauty Health go up and down completely randomly.
Pair Corralation between Toro and Beauty Health
Considering the 90-day investment horizon Toro Co is expected to under-perform the Beauty Health. But the stock apears to be less risky and, when comparing its historical volatility, Toro Co is 3.16 times less risky than Beauty Health. The stock trades about -0.06 of its potential returns per unit of risk. The Beauty Health Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 132.00 in Beauty Health Co on September 25, 2024 and sell it today you would earn a total of 12.00 from holding Beauty Health Co or generate 9.09% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Toro Co vs. Beauty Health Co
Performance |
Timeline |
Toro |
Beauty Health |
Toro and Beauty Health Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Toro and Beauty Health
The main advantage of trading using opposite Toro and Beauty Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toro position performs unexpectedly, Beauty Health 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 Beauty Health will offset losses from the drop in Beauty Health's long position.The idea behind Toro Co and Beauty Health 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.Beauty Health vs. Kimberly Clark | Beauty Health vs. Colgate Palmolive | Beauty Health vs. Procter Gamble | Beauty Health vs. The Clorox |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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