Correlation Between Hannan Metals and Toro Energy

Can any of the company-specific risk be diversified away by investing in both Hannan 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 Hannan 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 Hannan Metals and Toro Energy Limited, you can compare the effects of market volatilities on Hannan 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 Hannan Metals with a short position of Toro Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hannan Metals and Toro Energy.

Diversification Opportunities for Hannan Metals and Toro Energy

-0.84

Correlation Coefficient

Hannan Metals  Toro Energy

Pay attention - limited upside

The 3 months correlation between Hannan and Toro is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Hannan 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 Hannan 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 Hannan 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 Hannan Metals i.e., Hannan Metals and Toro Energy go up and down completely randomly.

Pair Corralation between Hannan Metals and Toro Energy

Assuming the 90 days horizon Hannan Metals is expected to generate 0.5 times more return on investment than Toro Energy. However, Hannan Metals is 2.0 times less risky than Toro Energy. It trades about 0.08 of its potential returns per unit of risk. Toro Energy Limited is currently generating about -0.08 per unit of risk. If you would invest  30.00  in Hannan Metals on June 22, 2024 and sell it today you would earn a total of  13.00  from holding Hannan Metals or generate 43.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	73.6%
Values	Daily Returns

Hannan Metals  vs.  Toro Energy Limited

Hannan Metals

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hannan Metals are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Hannan 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

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 October 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Hannan Metals and Toro Energy

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

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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.