Correlation Between Atco Mining and Toro Energy

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

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

Diversification Opportunities for Atco Mining and Toro Energy

0.19

Correlation Coefficient

Atco Mining  Toro Energy

Average diversification

The 3 months correlation between Atco and Toro is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Atco Mining and Toro Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toro Energy Limited and Atco Mining 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 Atco Mining are associated (or correlated) with Toro Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toro Energy Limited has no effect on the direction of Atco Mining i.e., Atco Mining and Toro Energy go up and down completely randomly.

Pair Corralation between Atco Mining and Toro Energy

Assuming the 90 days horizon Atco Mining is expected to generate 6.38 times less return on investment than Toro Energy. But when comparing it to its historical volatility, Atco Mining is 3.24 times less risky than Toro Energy. It trades about 0.03 of its potential returns per unit of risk. Toro Energy Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1.05  in Toro Energy Limited on March 21, 2024 and sell it today you would earn a total of  22.95  from holding Toro Energy Limited or generate 2185.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	63.84%
Values	Daily Returns

Atco Mining  vs.  Toro Energy Limited

Atco Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Atco Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Toro Energy Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toro Energy Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Atco Mining and Toro Energy

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

The idea behind Atco Mining and Toro Energy Limited 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.