Correlation Between Toyota and Grupe SAB

Can any of the company-specific risk be diversified away by investing in both Toyota and Grupe SAB 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 Grupe SAB into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Toyota Motor and Grupe SAB de, you can compare the effects of market volatilities on Toyota and Grupe SAB 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 Grupe SAB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toyota and Grupe SAB.

Diversification Opportunities for Toyota and Grupe SAB

-0.79

Correlation Coefficient

Toyota  Grupe SAB

Pay attention - limited upside

The 3 months correlation between Toyota and Grupe is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor and Grupe SAB de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupe SAB de 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 are associated (or correlated) with Grupe SAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupe SAB de has no effect on the direction of Toyota i.e., Toyota and Grupe SAB go up and down completely randomly.

Pair Corralation between Toyota and Grupe SAB

Assuming the 90 days trading horizon Toyota Motor is expected to under-perform the Grupe SAB. In addition to that, Toyota is 168.19 times more volatile than Grupe SAB de. It trades about -0.3 of its total potential returns per unit of risk. Grupe SAB de is currently generating about -0.16 per unit of volatility. If you would invest  3,484  in Grupe SAB de on March 7, 2024 and sell it today you would lose (5.00) from holding Grupe SAB de or give up 0.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	21.67%
Values	Daily Returns

Toyota Motor  vs.  Grupe SAB de

Toyota Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toyota Motor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Grupe SAB de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupe SAB de has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Grupe SAB is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Toyota and Grupe SAB

The main advantage of trading using opposite Toyota and Grupe SAB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toyota position performs unexpectedly, Grupe SAB 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 Grupe SAB will offset losses from the drop in Grupe SAB's long position.

The idea behind Toyota Motor and Grupe SAB de 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.

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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.