Correlation Between Sime Darby and Toyota
Can any of the company-specific risk be diversified away by investing in both Sime Darby 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 Sime Darby and Toyota into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sime Darby Bhd and Toyota Motor, you can compare the effects of market volatilities on Sime Darby 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 Sime Darby with a short position of Toyota. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sime Darby and Toyota.
Diversification Opportunities for Sime Darby and Toyota
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sime and Toyota is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Sime Darby Bhd and Toyota Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyota Motor and Sime Darby 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 Sime Darby Bhd 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 Sime Darby i.e., Sime Darby and Toyota go up and down completely randomly.
Pair Corralation between Sime Darby and Toyota
Assuming the 90 days horizon Sime Darby Bhd is expected to generate 1.27 times more return on investment than Toyota. However, Sime Darby is 1.27 times more volatile than Toyota Motor. It trades about 0.02 of its potential returns per unit of risk. Toyota Motor is currently generating about -0.01 per unit of risk. If you would invest 50.00 in Sime Darby Bhd on August 24, 2024 and sell it today you would earn a total of 1.00 from holding Sime Darby Bhd or generate 2.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 57.6% |
| Values | Daily Returns |
Sime Darby Bhd vs. Toyota Motor
Performance |
| Timeline |
| Sime Darby Bhd |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Toyota Motor |
Sime Darby and Toyota Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sime Darby and Toyota
The main advantage of trading using opposite Sime Darby and Toyota positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sime Darby 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.| Sime Darby vs. Zapp Electric Vehicles | Sime Darby vs. First Hydrogen Corp | Sime Darby vs. Guangzhou Automobile Group | Sime Darby vs. Phoenix Motor Common |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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