Correlation Between Toyota and New Residential
Can any of the company-specific risk be diversified away by investing in both Toyota and New Residential 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 New Residential into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Toyota Motor Corp and New Residential Investment, you can compare the effects of market volatilities on Toyota and New Residential 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 New Residential. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toyota and New Residential.
Diversification Opportunities for Toyota and New Residential
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Toyota and New is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor Corp and New Residential Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Residential Inve 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 Corp are associated (or correlated) with New Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Residential Inve has no effect on the direction of Toyota i.e., Toyota and New Residential go up and down completely randomly.
Pair Corralation between Toyota and New Residential
Assuming the 90 days trading horizon Toyota Motor Corp is expected to generate 1.82 times more return on investment than New Residential. However, Toyota is 1.82 times more volatile than New Residential Investment. It trades about 0.02 of its potential returns per unit of risk. New Residential Investment is currently generating about 0.03 per unit of risk. If you would invest 253,442 in Toyota Motor Corp on August 25, 2024 and sell it today you would earn a total of 13,008 from holding Toyota Motor Corp or generate 5.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 96.97% |
| Values | Daily Returns |
Toyota Motor Corp vs. New Residential Investment
Performance |
| Timeline |
| Toyota Motor Corp |
| New Residential Inve |
Toyota and New Residential Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toyota and New Residential
The main advantage of trading using opposite Toyota and New Residential positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toyota position performs unexpectedly, New Residential 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 New Residential will offset losses from the drop in New Residential's long position.| Toyota vs. Synchrony Financial | Toyota vs. St Galler Kantonalbank | Toyota vs. Prudential Financial | Toyota vs. Bank of Ireland |
| New Residential vs. Samsung Electronics Co | New Residential vs. Samsung Electronics Co | New Residential vs. Hyundai Motor | New Residential vs. Toyota Motor Corp |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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