Correlation Between Toyota and InterContinental
Can any of the company-specific risk be diversified away by investing in both Toyota and InterContinental 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 InterContinental 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 InterContinental Hotels Group, you can compare the effects of market volatilities on Toyota and InterContinental 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 InterContinental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toyota and InterContinental.
Diversification Opportunities for Toyota and InterContinental
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Toyota and InterContinental is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor Corp and InterContinental Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InterContinental Hotels 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 InterContinental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InterContinental Hotels has no effect on the direction of Toyota i.e., Toyota and InterContinental go up and down completely randomly.
Pair Corralation between Toyota and InterContinental
Assuming the 90 days trading horizon Toyota is expected to generate 1.91 times less return on investment than InterContinental. But when comparing it to its historical volatility, Toyota Motor Corp is 1.44 times less risky than InterContinental. It trades about 0.29 of its potential returns per unit of risk. InterContinental Hotels Group is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest 857,800 in InterContinental Hotels Group on August 24, 2024 and sell it today you would earn a total of 106,600 from holding InterContinental Hotels Group or generate 12.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Toyota Motor Corp vs. InterContinental Hotels Group
Performance |
| Timeline |
| Toyota Motor Corp |
| InterContinental Hotels |
Toyota and InterContinental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toyota and InterContinental
The main advantage of trading using opposite Toyota and InterContinental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toyota position performs unexpectedly, InterContinental 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 InterContinental will offset losses from the drop in InterContinental's long position.| Toyota vs. Austevoll Seafood ASA | Toyota vs. St Galler Kantonalbank | Toyota vs. Associated British Foods | Toyota vs. Royal Bank of |
| InterContinental vs. Toyota Motor Corp | InterContinental vs. SoftBank Group Corp | InterContinental vs. State Bank of | InterContinental vs. Freddie Mac |
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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