Correlation Between Toyota and Scandic Hotels
Can any of the company-specific risk be diversified away by investing in both Toyota and Scandic Hotels 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 Scandic Hotels 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 Scandic Hotels Group, you can compare the effects of market volatilities on Toyota and Scandic Hotels 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 Scandic Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toyota and Scandic Hotels.
Diversification Opportunities for Toyota and Scandic Hotels
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Toyota and Scandic is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor Corp and Scandic Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandic Hotels Group 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 Scandic Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandic Hotels Group has no effect on the direction of Toyota i.e., Toyota and Scandic Hotels go up and down completely randomly.
Pair Corralation between Toyota and Scandic Hotels
Assuming the 90 days trading horizon Toyota is expected to generate 1.4 times less return on investment than Scandic Hotels. In addition to that, Toyota is 1.37 times more volatile than Scandic Hotels Group. It trades about 0.04 of its total potential returns per unit of risk. Scandic Hotels Group is currently generating about 0.08 per unit of volatility. If you would invest 4,179 in Scandic Hotels Group on August 31, 2024 and sell it today you would earn a total of 2,543 from holding Scandic Hotels Group or generate 60.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 96.03% |
| Values | Daily Returns |
Toyota Motor Corp vs. Scandic Hotels Group
Performance |
| Timeline |
| Toyota Motor Corp |
| Scandic Hotels Group |
Toyota and Scandic Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toyota and Scandic Hotels
The main advantage of trading using opposite Toyota and Scandic Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toyota position performs unexpectedly, Scandic Hotels 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 Scandic Hotels will offset losses from the drop in Scandic Hotels' long position.| Toyota vs. Norwegian Air Shuttle | Toyota vs. Alaska Air Group | Toyota vs. Molson Coors Beverage | Toyota vs. Finnair Oyj |
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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