Correlation Between Markel Corp and Toyota

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

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

Diversification Opportunities for Markel Corp and Toyota

0.49

Correlation Coefficient

Markel Corp  Toyota

Very weak diversification

The 3 months correlation between Markel and Toyota is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Markel Corp and Toyota Motor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyota Motor Corp and Markel Corp 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 Markel Corp 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 Corp has no effect on the direction of Markel Corp i.e., Markel Corp and Toyota go up and down completely randomly.

Pair Corralation between Markel Corp and Toyota

Assuming the 90 days trading horizon Markel Corp is expected to generate 0.66 times more return on investment than Toyota. However, Markel Corp is 1.51 times less risky than Toyota. It trades about 0.15 of its potential returns per unit of risk. Toyota Motor Corp is currently generating about 0.09 per unit of risk. If you would invest  157,118  in Markel Corp on September 15, 2024 and sell it today you would earn a total of  17,515  from holding Markel Corp or generate 11.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.48%
Values	Daily Returns

Markel Corp  vs.  Toyota Motor Corp

Markel Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Markel Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Markel Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Toyota Motor Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Toyota Motor Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Toyota may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Markel Corp and Toyota

The main advantage of trading using opposite Markel Corp and Toyota positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Markel Corp 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 Markel Corp and Toyota Motor Corp 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.