Correlation Between NFI and Toyota
Can any of the company-specific risk be diversified away by investing in both NFI 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 NFI and Toyota into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NFI Group and Toyota Motor, you can compare the effects of market volatilities on NFI 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 NFI with a short position of Toyota. Check out your portfolio center. Please also check ongoing floating volatility patterns of NFI and Toyota.
Diversification Opportunities for NFI and Toyota
Poor diversification
The 3 months correlation between NFI and Toyota is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding NFI Group and Toyota Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyota Motor and NFI 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 NFI Group 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 has no effect on the direction of NFI i.e., NFI and Toyota go up and down completely randomly.
Pair Corralation between NFI and Toyota
Assuming the 90 days horizon NFI Group is expected to under-perform the Toyota. In addition to that, NFI is 1.63 times more volatile than Toyota Motor. It trades about -0.27 of its total potential returns per unit of risk. Toyota Motor is currently generating about -0.01 per unit of volatility. If you would invest 17,663 in Toyota Motor on August 28, 2024 and sell it today you would lose (80.00) from holding Toyota Motor or give up 0.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NFI Group vs. Toyota Motor
Performance |
| Timeline |
| NFI Group |
| Toyota Motor |
NFI and Toyota Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NFI and Toyota
The main advantage of trading using opposite NFI and Toyota positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NFI 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.| NFI vs. Zapp Electric Vehicles | NFI vs. Guangzhou Automobile Group | NFI vs. Exor NV | NFI vs. Aston Martin Lagonda |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
Other Complementary Tools
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. |