Correlation Between Avarone Metals and Toro Energy

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

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

Diversification Opportunities for Avarone Metals and Toro Energy

-0.49

Correlation Coefficient

Avarone Metals  Toro Energy

Very good diversification

The 3 months correlation between Avarone and Toro is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Avarone Metals 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 Avarone 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 Avarone Metals 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 Avarone Metals i.e., Avarone Metals and Toro Energy go up and down completely randomly.

Pair Corralation between Avarone Metals and Toro Energy

Assuming the 90 days horizon Avarone Metals is expected to generate 0.45 times more return on investment than Toro Energy. However, Avarone Metals is 2.2 times less risky than Toro Energy. It trades about 0.13 of its potential returns per unit of risk. Toro Energy Limited is currently generating about 0.02 per unit of risk. If you would invest  2.02  in Avarone Metals on March 16, 2024 and sell it today you would earn a total of  0.48  from holding Avarone Metals or generate 23.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	88.89%
Values	Daily Returns

Avarone Metals  vs.  Toro Energy Limited

Avarone Metals

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Avarone Metals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Avarone Metals reported solid returns over the last few months and may actually be approaching a breakup point.

Toro Energy Limited

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Toro Energy Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly unsteady basic indicators, Toro Energy may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Avarone Metals and Toro Energy

The main advantage of trading using opposite Avarone Metals and Toro Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avarone Metals 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 Avarone Metals 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.