Correlation Between Toll Brothers and CENTRICA ADR

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

By analyzing existing cross correlation between Toll Brothers and CENTRICA ADR NEW, you can compare the effects of market volatilities on Toll Brothers and CENTRICA ADR 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 Toll Brothers with a short position of CENTRICA ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toll Brothers and CENTRICA ADR.

Diversification Opportunities for Toll Brothers and CENTRICA ADR

0.24

Correlation Coefficient

Toll Brothers  CENTRICA ADR

Modest diversification

The 3 months correlation between Toll and CENTRICA is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Toll Brothers and CENTRICA ADR NEW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CENTRICA ADR NEW and Toll Brothers 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 Toll Brothers are associated (or correlated) with CENTRICA ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CENTRICA ADR NEW has no effect on the direction of Toll Brothers i.e., Toll Brothers and CENTRICA ADR go up and down completely randomly.

Pair Corralation between Toll Brothers and CENTRICA ADR

Assuming the 90 days horizon Toll Brothers is expected to generate 1.14 times more return on investment than CENTRICA ADR. However, Toll Brothers is 1.14 times more volatile than CENTRICA ADR NEW. It trades about 0.12 of its potential returns per unit of risk. CENTRICA ADR NEW is currently generating about 0.01 per unit of risk. If you would invest  8,718  in Toll Brothers on April 23, 2025 and sell it today you would earn a total of  1,297  from holding Toll Brothers or generate 14.88% return on investment over 90 days.

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

Toll Brothers  vs.  CENTRICA ADR NEW

Toll Brothers

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Toll Brothers are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Toll Brothers reported solid returns over the last few months and may actually be approaching a breakup point.

CENTRICA ADR NEW

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CENTRICA ADR NEW are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, CENTRICA ADR is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Toll Brothers and CENTRICA ADR

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

The idea behind Toll Brothers and CENTRICA ADR NEW 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.