Correlation Between SM Investments and Toro

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

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

Diversification Opportunities for SM Investments and Toro

-0.25

Correlation Coefficient

SM Investments  Toro

Very good diversification

The 3 months correlation between SVTMF and Toro is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding SM Investments and Toro Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toro and SM Investments 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 SM Investments are associated (or correlated) with Toro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toro has no effect on the direction of SM Investments i.e., SM Investments and Toro go up and down completely randomly.

Pair Corralation between SM Investments and Toro

Assuming the 90 days horizon SM Investments is expected to under-perform the Toro. But the pink sheet apears to be less risky and, when comparing its historical volatility, SM Investments is 1.42 times less risky than Toro. The pink sheet trades about -0.13 of its potential returns per unit of risk. The Toro Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  7,644  in Toro Co on May 18, 2025 and sell it today you would earn a total of  42.00  from holding Toro Co or generate 0.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

SM Investments  vs.  Toro Co

SM Investments

Risk-Adjusted Performance

Weakest

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

Toro

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Toro Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Toro is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SM Investments and Toro

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

The idea behind SM Investments and Toro Co 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.