Correlation Between American Express and Toyota
Can any of the company-specific risk be diversified away by investing in both American Express and Toyota 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 American Express and Toyota into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Toyota Motor Corp, you can compare the effects of market volatilities on American Express and Toyota 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 American Express with a short position of Toyota. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Toyota.
Diversification Opportunities for American Express and Toyota
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and Toyota is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding American Express and Toyota Motor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyota Motor Corp and American Express 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 American Express are associated (or correlated) with Toyota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toyota Motor Corp has no effect on the direction of American Express i.e., American Express and Toyota go up and down completely randomly.
Pair Corralation between American Express and Toyota
Considering the 90-day investment horizon American Express is expected to generate 1.21 times more return on investment than Toyota. However, American Express is 1.21 times more volatile than Toyota Motor Corp. It trades about 0.26 of its potential returns per unit of risk. Toyota Motor Corp is currently generating about 0.1 per unit of risk. If you would invest 27,147 in American Express on August 27, 2024 and sell it today you would earn a total of 2,983 from holding American Express or generate 10.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Express vs. Toyota Motor Corp
Performance |
| Timeline |
| American Express |
| Toyota Motor Corp |
American Express and Toyota Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Express and Toyota
The main advantage of trading using opposite American Express and Toyota positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express position performs unexpectedly, Toyota 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 Toyota will offset losses from the drop in Toyota's long position.| American Express vs. SLM Corp | American Express vs. Orix Corp Ads | American Express vs. FirstCash | American Express vs. Medallion Financial Corp |
Check out your portfolio center.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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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