Correlation Between Toyota and Whitbread PLC
Can any of the company-specific risk be diversified away by investing in both Toyota and Whitbread PLC 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 Whitbread PLC 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 Whitbread PLC, you can compare the effects of market volatilities on Toyota and Whitbread PLC 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 Whitbread PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toyota and Whitbread PLC.
Diversification Opportunities for Toyota and Whitbread PLC
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Toyota and Whitbread is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor Corp and Whitbread PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whitbread PLC 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 Whitbread PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whitbread PLC has no effect on the direction of Toyota i.e., Toyota and Whitbread PLC go up and down completely randomly.
Pair Corralation between Toyota and Whitbread PLC
Assuming the 90 days trading horizon Toyota Motor Corp is expected to generate 0.86 times more return on investment than Whitbread PLC. However, Toyota Motor Corp is 1.17 times less risky than Whitbread PLC. It trades about 0.11 of its potential returns per unit of risk. Whitbread PLC is currently generating about -0.4 per unit of risk. If you would invest 260,250 in Toyota Motor Corp on August 29, 2024 and sell it today you would earn a total of 6,200 from holding Toyota Motor Corp or generate 2.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Toyota Motor Corp vs. Whitbread PLC
Performance |
| Timeline |
| Toyota Motor Corp |
| Whitbread PLC |
Toyota and Whitbread PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toyota and Whitbread PLC
The main advantage of trading using opposite Toyota and Whitbread PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toyota position performs unexpectedly, Whitbread PLC 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 Whitbread PLC will offset losses from the drop in Whitbread PLC's long position.The idea behind Toyota Motor Corp and Whitbread PLC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Whitbread PLC vs. Coeur Mining | Whitbread PLC vs. JB Hunt Transport | Whitbread PLC vs. GreenX Metals | Whitbread PLC vs. T Mobile |
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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