Correlation Between Toyota and Caledonia Mining
Can any of the company-specific risk be diversified away by investing in both Toyota and Caledonia Mining 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 Caledonia Mining 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 Caledonia Mining, you can compare the effects of market volatilities on Toyota and Caledonia Mining 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 Caledonia Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toyota and Caledonia Mining.
Diversification Opportunities for Toyota and Caledonia Mining
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Toyota and Caledonia is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor Corp and Caledonia Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caledonia Mining 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 Caledonia Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caledonia Mining has no effect on the direction of Toyota i.e., Toyota and Caledonia Mining go up and down completely randomly.
Pair Corralation between Toyota and Caledonia Mining
Assuming the 90 days trading horizon Toyota Motor Corp is expected to under-perform the Caledonia Mining. But the stock apears to be less risky and, when comparing its historical volatility, Toyota Motor Corp is 1.14 times less risky than Caledonia Mining. The stock trades about -0.24 of its potential returns per unit of risk. The Caledonia Mining is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 78,000 in Caledonia Mining on November 3, 2024 and sell it today you would lose (750.00) from holding Caledonia Mining or give up 0.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Toyota Motor Corp vs. Caledonia Mining
Performance |
| Timeline |
| Toyota Motor Corp |
| Caledonia Mining |
Toyota and Caledonia Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toyota and Caledonia Mining
The main advantage of trading using opposite Toyota and Caledonia Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toyota position performs unexpectedly, Caledonia Mining 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 Caledonia Mining will offset losses from the drop in Caledonia Mining's long position.| Toyota vs. Mobius Investment Trust | Toyota vs. Evolution Gaming Group | Toyota vs. Martin Marietta Materials | Toyota vs. Diversified Energy |
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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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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