Correlation Between Burberry Group and Toyota
Can any of the company-specific risk be diversified away by investing in both Burberry Group 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 Burberry Group and Toyota into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Burberry Group PLC and Toyota Motor Corp, you can compare the effects of market volatilities on Burberry Group 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 Burberry Group with a short position of Toyota. Check out your portfolio center. Please also check ongoing floating volatility patterns of Burberry Group and Toyota.
Diversification Opportunities for Burberry Group and Toyota
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Burberry and Toyota is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Burberry Group PLC 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 Burberry Group 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 Burberry Group PLC 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 Burberry Group i.e., Burberry Group and Toyota go up and down completely randomly.
Pair Corralation between Burberry Group and Toyota
Assuming the 90 days trading horizon Burberry Group PLC is expected to generate 5.5 times more return on investment than Toyota. However, Burberry Group is 5.5 times more volatile than Toyota Motor Corp. It trades about 0.16 of its potential returns per unit of risk. Toyota Motor Corp is currently generating about 0.11 per unit of risk. If you would invest 76,020 in Burberry Group PLC on August 31, 2024 and sell it today you would earn a total of 13,200 from holding Burberry Group PLC or generate 17.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Burberry Group PLC vs. Toyota Motor Corp
Performance |
| Timeline |
| Burberry Group PLC |
| Toyota Motor Corp |
Burberry Group and Toyota Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Burberry Group and Toyota
The main advantage of trading using opposite Burberry Group and Toyota positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Burberry Group 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.| Burberry Group vs. SBM Offshore NV | Burberry Group vs. Charter Communications Cl | Burberry Group vs. Cairo Communication SpA | Burberry Group vs. Aeorema Communications Plc |
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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