Correlation Between FirstService Corp and Toromont Industries

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

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

Diversification Opportunities for FirstService Corp and Toromont Industries

0.33

Correlation Coefficient

FirstService Corp  Toromont Industries

Weak diversification

The 3 months correlation between FirstService and Toromont is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding FirstService Corp and Toromont Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toromont Industries and FirstService Corp 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 FirstService Corp are associated (or correlated) with Toromont Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toromont Industries has no effect on the direction of FirstService Corp i.e., FirstService Corp and Toromont Industries go up and down completely randomly.

Pair Corralation between FirstService Corp and Toromont Industries

Assuming the 90 days trading horizon FirstService Corp is expected to generate 3.39 times less return on investment than Toromont Industries. But when comparing it to its historical volatility, FirstService Corp is 1.17 times less risky than Toromont Industries. It trades about 0.06 of its potential returns per unit of risk. Toromont Industries is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  11,269  in Toromont Industries on April 22, 2025 and sell it today you would earn a total of  1,476  from holding Toromont Industries or generate 13.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

FirstService Corp  vs.  Toromont Industries

FirstService Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in FirstService Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, FirstService Corp is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Toromont Industries

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Toromont Industries are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, Toromont Industries may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with FirstService Corp and Toromont Industries

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

The idea behind FirstService Corp and Toromont Industries 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.