Correlation Between Falcon Metals and Toro

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

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

Diversification Opportunities for Falcon Metals and Toro

0.04

Correlation Coefficient

Falcon Metals  Toro

Significant diversification

The 3 months correlation between Falcon and Toro is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Falcon Metals Limited and Toro Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toro and Falcon Metals 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 Falcon Metals Limited 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 Falcon Metals i.e., Falcon Metals and Toro go up and down completely randomly.

Pair Corralation between Falcon Metals and Toro

If you would invest  7,999  in Toro Co on April 2, 2024 and sell it today you would earn a total of  1,160  from holding Toro Co or generate 14.5% return on investment over 90 days.

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

Falcon Metals Limited  vs.  Toro Co

Falcon Metals Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Falcon Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Falcon Metals is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Toro

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Toro Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Toro may actually be approaching a critical reversion point that can send shares even higher in August 2024.

Pair Trading with Falcon Metals and Toro

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

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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.