Correlation Between Toyota and Sanlam
Can any of the company-specific risk be diversified away by investing in both Toyota and Sanlam 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 Sanlam into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Toyota Motor and Sanlam Ltd PK, you can compare the effects of market volatilities on Toyota and Sanlam 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 Sanlam. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toyota and Sanlam.
Diversification Opportunities for Toyota and Sanlam
Excellent diversification
The 3 months correlation between Toyota and Sanlam is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor and Sanlam Ltd PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanlam Ltd PK 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 Sanlam. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanlam Ltd PK has no effect on the direction of Toyota i.e., Toyota and Sanlam go up and down completely randomly.
Pair Corralation between Toyota and Sanlam
Allowing for the 90-day total investment horizon Toyota Motor is expected to generate 1.15 times more return on investment than Sanlam. However, Toyota is 1.15 times more volatile than Sanlam Ltd PK. It trades about 0.02 of its potential returns per unit of risk. Sanlam Ltd PK is currently generating about -0.05 per unit of risk. If you would invest 18,045 in Toyota Motor on October 22, 2024 and sell it today you would earn a total of 33.00 from holding Toyota Motor or generate 0.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Toyota Motor vs. Sanlam Ltd PK
Performance |
| Timeline |
| Toyota Motor |
| Sanlam Ltd PK |
Toyota and Sanlam Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toyota and Sanlam
The main advantage of trading using opposite Toyota and Sanlam positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toyota position performs unexpectedly, Sanlam 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 Sanlam will offset losses from the drop in Sanlam's long position.The idea behind Toyota Motor and Sanlam Ltd PK 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.| Sanlam vs. Ping An Insurance | Sanlam vs. CNO Financial Group | Sanlam vs. Genworth Financial | Sanlam vs. MetLife Preferred Stock |
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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