Correlation Between Toro Energy and E79 Resources

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

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

Diversification Opportunities for Toro Energy and E79 Resources

0.19

Correlation Coefficient

Toro Energy  E79 Resources

Average diversification

The 3 months correlation between Toro and E79 is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Toro Energy Limited and E79 Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E79 Resources Corp and Toro Energy 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 Toro Energy Limited are associated (or correlated) with E79 Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E79 Resources Corp has no effect on the direction of Toro Energy i.e., Toro Energy and E79 Resources go up and down completely randomly.

Pair Corralation between Toro Energy and E79 Resources

Assuming the 90 days horizon Toro Energy Limited is expected to generate 1.02 times more return on investment than E79 Resources. However, Toro Energy is 1.02 times more volatile than E79 Resources Corp. It trades about -0.14 of its potential returns per unit of risk. E79 Resources Corp is currently generating about -0.21 per unit of risk. If you would invest  29.00  in Toro Energy Limited on February 24, 2024 and sell it today you would lose (6.00) from holding Toro Energy Limited or give up 20.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Toro Energy Limited  vs.  E79 Resources Corp

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.

E79 Resources Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in E79 Resources Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, E79 Resources may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Toro Energy and E79 Resources

The main advantage of trading using opposite Toro Energy and E79 Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toro Energy position performs unexpectedly, E79 Resources 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 E79 Resources will offset losses from the drop in E79 Resources' long position.

The idea behind Toro Energy Limited and E79 Resources Corp 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.