Correlation Between Toyota and Baker Hughes
Can any of the company-specific risk be diversified away by investing in both Toyota and Baker Hughes 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 Baker Hughes 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 Baker Hughes Co, you can compare the effects of market volatilities on Toyota and Baker Hughes 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 Baker Hughes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toyota and Baker Hughes.
Diversification Opportunities for Toyota and Baker Hughes
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Toyota and Baker is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor Corp and Baker Hughes Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baker Hughes 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 Baker Hughes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baker Hughes has no effect on the direction of Toyota i.e., Toyota and Baker Hughes go up and down completely randomly.
Pair Corralation between Toyota and Baker Hughes
Assuming the 90 days trading horizon Toyota Motor Corp is expected to generate 0.96 times more return on investment than Baker Hughes. However, Toyota Motor Corp is 1.04 times less risky than Baker Hughes. It trades about 0.04 of its potential returns per unit of risk. Baker Hughes Co is currently generating about -0.12 per unit of risk. If you would invest 265,350 in Toyota Motor Corp on September 12, 2024 and sell it today you would earn a total of 2,600 from holding Toyota Motor Corp or generate 0.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Toyota Motor Corp vs. Baker Hughes Co
Performance |
| Timeline |
| Toyota Motor Corp |
| Baker Hughes |
Toyota and Baker Hughes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toyota and Baker Hughes
The main advantage of trading using opposite Toyota and Baker Hughes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toyota position performs unexpectedly, Baker Hughes 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 Baker Hughes will offset losses from the drop in Baker Hughes' long position.| Toyota vs. Various Eateries PLC | Toyota vs. OneSavings Bank PLC | Toyota vs. Skandinaviska Enskilda Banken | Toyota vs. Sydbank |
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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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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