Correlation Between Snap On and Toro

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

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

Diversification Opportunities for Snap On and Toro

-0.1

Correlation Coefficient

Snap On  Toro

Good diversification

The 3 months correlation between Snap and Toro is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Snap On and Toro Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toro and Snap On 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 Snap On 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 Snap On i.e., Snap On and Toro go up and down completely randomly.

Pair Corralation between Snap On and Toro

Considering the 90-day investment horizon Snap On is expected to generate 0.86 times more return on investment than Toro. However, Snap On is 1.17 times less risky than Toro. It trades about 0.04 of its potential returns per unit of risk. Toro Co is currently generating about -0.06 per unit of risk. If you would invest  26,756  in Snap On on February 22, 2024 and sell it today you would earn a total of  855.00  from holding Snap On or generate 3.2% return on investment over 90 days.

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

Snap On  vs.  Toro Co

Snap On

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Snap On are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Snap On is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Snap On and Toro

The main advantage of trading using opposite Snap On and Toro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap On 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 Snap On 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.