Correlation Between E79 Resources and Toro Energy

Can any of the company-specific risk be diversified away by investing in both E79 Resources 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 E79 Resources and Toro Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between E79 Resources Corp and Toro Energy Limited, you can compare the effects of market volatilities on E79 Resources 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 E79 Resources with a short position of Toro Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of E79 Resources and Toro Energy.

Diversification Opportunities for E79 Resources and Toro Energy

0.18

Correlation Coefficient

E79 Resources  Toro Energy

Average diversification

The 3 months correlation between E79 and Toro is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding E79 Resources Corp 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 E79 Resources 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 E79 Resources Corp 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 E79 Resources i.e., E79 Resources and Toro Energy go up and down completely randomly.

Pair Corralation between E79 Resources and Toro Energy

Assuming the 90 days horizon E79 Resources Corp is expected to generate 1.27 times more return on investment than Toro Energy. However, E79 Resources is 1.27 times more volatile than Toro Energy Limited. It trades about 0.01 of its potential returns per unit of risk. Toro Energy Limited is currently generating about -0.04 per unit of risk. If you would invest  2.07  in E79 Resources Corp on February 22, 2024 and sell it today you would lose (0.31) from holding E79 Resources Corp or give up 14.98% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

E79 Resources Corp  vs.  Toro Energy Limited

E79 Resources Corp

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days E79 Resources Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, E79 Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the 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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with E79 Resources and Toro Energy

The main advantage of trading using opposite E79 Resources and Toro Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E79 Resources 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 E79 Resources Corp 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.

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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.