Correlation Between Marcopolo and Toyota

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

By analyzing existing cross correlation between Marcopolo SA and Toyota Motor, you can compare the effects of market volatilities on Marcopolo and Toyota 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 Marcopolo with a short position of Toyota. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marcopolo and Toyota.

Diversification Opportunities for Marcopolo and Toyota

0.67

Correlation Coefficient

Marcopolo  Toyota

Poor diversification

The 3 months correlation between Marcopolo and Toyota is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Marcopolo SA and Toyota Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyota Motor and Marcopolo 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 Marcopolo SA are associated (or correlated) with Toyota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toyota Motor has no effect on the direction of Marcopolo i.e., Marcopolo and Toyota go up and down completely randomly.

Pair Corralation between Marcopolo and Toyota

Assuming the 90 days trading horizon Marcopolo SA is expected to generate 1.44 times more return on investment than Toyota. However, Marcopolo is 1.44 times more volatile than Toyota Motor. It trades about 0.02 of its potential returns per unit of risk. Toyota Motor is currently generating about 0.01 per unit of risk. If you would invest  693.00  in Marcopolo SA on February 21, 2024 and sell it today you would earn a total of  10.00  from holding Marcopolo SA or generate 1.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Marcopolo SA  vs.  Toyota Motor

Marcopolo SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Marcopolo SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Marcopolo is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Toyota Motor

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Toyota Motor are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Toyota is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Marcopolo and Toyota

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

The idea behind Marcopolo SA and Toyota Motor 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.