Correlation Between Toyota and Baker Steel
Can any of the company-specific risk be diversified away by investing in both Toyota and Baker Steel 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 Steel 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 Steel Resources, you can compare the effects of market volatilities on Toyota and Baker Steel 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 Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toyota and Baker Steel.
Diversification Opportunities for Toyota and Baker Steel
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Toyota and Baker is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor Corp and Baker Steel Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baker Steel Resources 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 Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baker Steel Resources has no effect on the direction of Toyota i.e., Toyota and Baker Steel go up and down completely randomly.
Pair Corralation between Toyota and Baker Steel
Assuming the 90 days trading horizon Toyota Motor Corp is expected to generate 0.57 times more return on investment than Baker Steel. However, Toyota Motor Corp is 1.77 times less risky than Baker Steel. It trades about 0.05 of its potential returns per unit of risk. Baker Steel Resources is currently generating about 0.02 per unit of risk. If you would invest 182,339 in Toyota Motor Corp on November 28, 2024 and sell it today you would earn a total of 88,711 from holding Toyota Motor Corp or generate 48.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 88.93% |
| Values | Daily Returns |
Toyota Motor Corp vs. Baker Steel Resources
Performance |
| Timeline |
| Toyota Motor Corp |
| Baker Steel Resources |
Toyota and Baker Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toyota and Baker Steel
The main advantage of trading using opposite Toyota and Baker Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toyota position performs unexpectedly, Baker Steel 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 Steel will offset losses from the drop in Baker Steel's long position.| Toyota vs. Naked Wines plc | Toyota vs. Central Asia Metals | Toyota vs. Zegona Communications Plc | Toyota vs. Capital Metals PLC |
| Baker Steel vs. United States Steel | Baker Steel vs. Ondine Biomedical | Baker Steel vs. Naturhouse Health SA | Baker Steel vs. Creo Medical Group |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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