Correlation Between Toro and CITIGROUP

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

By analyzing existing cross correlation between Toro Co and CITIGROUP INC 445, you can compare the effects of market volatilities on Toro and CITIGROUP 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 CITIGROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toro and CITIGROUP.

Diversification Opportunities for Toro and CITIGROUP

-0.08

Correlation Coefficient

Toro  CITIGROUP

Good diversification

The 3 months correlation between Toro and CITIGROUP is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Toro Co and CITIGROUP INC 445 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIGROUP INC 445 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 CITIGROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIGROUP INC 445 has no effect on the direction of Toro i.e., Toro and CITIGROUP go up and down completely randomly.

Pair Corralation between Toro and CITIGROUP

Considering the 90-day investment horizon Toro Co is expected to generate 4.14 times more return on investment than CITIGROUP. However, Toro is 4.14 times more volatile than CITIGROUP INC 445. It trades about 0.09 of its potential returns per unit of risk. CITIGROUP INC 445 is currently generating about -0.03 per unit of risk. If you would invest  8,262  in Toro Co on September 12, 2024 and sell it today you would earn a total of  586.50  from holding Toro Co or generate 7.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Toro Co  vs.  CITIGROUP INC 445

Toro

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Toro Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Toro may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CITIGROUP INC 445

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CITIGROUP INC 445 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CITIGROUP is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Toro and CITIGROUP

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

The idea behind Toro Co and CITIGROUP INC 445 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.