Correlation Between Toyota and Sparebank
Can any of the company-specific risk be diversified away by investing in both Toyota and Sparebank 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 Sparebank 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 Sparebank 1 SR, you can compare the effects of market volatilities on Toyota and Sparebank 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 Sparebank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toyota and Sparebank.
Diversification Opportunities for Toyota and Sparebank
Very weak diversification
The 3 months correlation between Toyota and Sparebank is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor Corp and Sparebank 1 SR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparebank 1 SR 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 Sparebank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparebank 1 SR has no effect on the direction of Toyota i.e., Toyota and Sparebank go up and down completely randomly.
Pair Corralation between Toyota and Sparebank
Assuming the 90 days trading horizon Toyota Motor Corp is expected to generate 2.47 times more return on investment than Sparebank. However, Toyota is 2.47 times more volatile than Sparebank 1 SR. It trades about 0.1 of its potential returns per unit of risk. Sparebank 1 SR is currently generating about 0.12 per unit of risk. If you would invest 266,450 in Toyota Motor Corp on October 25, 2024 and sell it today you would earn a total of 25,100 from holding Toyota Motor Corp or generate 9.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Toyota Motor Corp vs. Sparebank 1 SR
Performance |
| Timeline |
| Toyota Motor Corp |
| Sparebank 1 SR |
Toyota and Sparebank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toyota and Sparebank
The main advantage of trading using opposite Toyota and Sparebank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toyota position performs unexpectedly, Sparebank 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 Sparebank will offset losses from the drop in Sparebank's long position.| Toyota vs. DFS Furniture PLC | Toyota vs. Playtech Plc | Toyota vs. Summit Materials Cl | Toyota vs. Compagnie Plastic Omnium |
| Sparebank vs. Toyota Motor Corp | Sparebank vs. SoftBank Group Corp | Sparebank vs. OTP Bank Nyrt | Sparebank vs. ONEOK Inc |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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