Correlation Between EJF Investments and Toyota
Can any of the company-specific risk be diversified away by investing in both EJF Investments 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 EJF Investments and Toyota into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EJF Investments and Toyota Motor Corp, you can compare the effects of market volatilities on EJF Investments 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 EJF Investments with a short position of Toyota. Check out your portfolio center. Please also check ongoing floating volatility patterns of EJF Investments and Toyota.
Diversification Opportunities for EJF Investments and Toyota
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between EJF and Toyota is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding EJF Investments 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 EJF 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 EJF Investments 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 EJF Investments i.e., EJF Investments and Toyota go up and down completely randomly.
Pair Corralation between EJF Investments and Toyota
Assuming the 90 days trading horizon EJF Investments is expected to generate 1.78 times less return on investment than Toyota. But when comparing it to its historical volatility, EJF Investments is 2.53 times less risky than Toyota. It trades about 0.22 of its potential returns per unit of risk. Toyota Motor Corp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 271,850 in Toyota Motor Corp on October 13, 2024 and sell it today you would earn a total of 25,150 from holding Toyota Motor Corp or generate 9.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
EJF Investments vs. Toyota Motor Corp
Performance |
| Timeline |
| EJF Investments |
| Toyota Motor Corp |
EJF Investments and Toyota Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EJF Investments and Toyota
The main advantage of trading using opposite EJF Investments and Toyota positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EJF Investments 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.| EJF Investments vs. Universal Music Group | EJF Investments vs. Liontrust Asset Management | EJF Investments vs. FC Investment Trust | EJF Investments vs. Monks Investment Trust |
| Toyota vs. Mobius Investment Trust | Toyota vs. Chrysalis Investments | Toyota vs. EJF Investments | Toyota vs. Spotify Technology SA |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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