Correlation Between Toyota and Hino Motors
Can any of the company-specific risk be diversified away by investing in both Toyota and Hino Motors 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 Toyota and Hino Motors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Toyota Motor and Hino Motors Ltd, you can compare the effects of market volatilities on Toyota and Hino Motors 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 Toyota with a short position of Hino Motors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toyota and Hino Motors.
Diversification Opportunities for Toyota and Hino Motors
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Toyota and Hino is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor and Hino Motors Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hino Motors and Toyota 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 Toyota Motor are associated (or correlated) with Hino Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hino Motors has no effect on the direction of Toyota i.e., Toyota and Hino Motors go up and down completely randomly.
Pair Corralation between Toyota and Hino Motors
Allowing for the 90-day total investment horizon Toyota Motor is expected to under-perform the Hino Motors. But the stock apears to be less risky and, when comparing its historical volatility, Toyota Motor is 2.29 times less risky than Hino Motors. The stock trades about -0.04 of its potential returns per unit of risk. The Hino Motors Ltd is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 2,399 in Hino Motors Ltd on September 2, 2024 and sell it today you would earn a total of 201.00 from holding Hino Motors Ltd or generate 8.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Toyota Motor vs. Hino Motors Ltd
Performance |
| Timeline |
| Toyota Motor |
| Hino Motors |
Toyota and Hino Motors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toyota and Hino Motors
The main advantage of trading using opposite Toyota and Hino Motors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toyota position performs unexpectedly, Hino Motors 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 Hino Motors will offset losses from the drop in Hino Motors' long position.The idea behind Toyota Motor and Hino Motors Ltd pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Hino Motors vs. Volkswagen AG 110 | Hino Motors vs. Stellantis NV | Hino Motors vs. Toyota Motor | Hino Motors vs. Honda Motor Co |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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