Correlation Between AmeraMex International and Toyota Industries

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

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

Diversification Opportunities for AmeraMex International and Toyota Industries

0.03

Correlation Coefficient

AmeraMex International  Toyota Industries

Significant diversification

The 3 months correlation between AmeraMex and Toyota is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding AmeraMex International and Toyota Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyota Industries and AmeraMex International 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 AmeraMex International are associated (or correlated) with Toyota Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toyota Industries has no effect on the direction of AmeraMex International i.e., AmeraMex International and Toyota Industries go up and down completely randomly.

Pair Corralation between AmeraMex International and Toyota Industries

Given the investment horizon of 90 days AmeraMex International is expected to under-perform the Toyota Industries. In addition to that, AmeraMex International is 3.52 times more volatile than Toyota Industries. It trades about -0.05 of its total potential returns per unit of risk. Toyota Industries is currently generating about -0.02 per unit of volatility. If you would invest  7,631  in Toyota Industries on September 16, 2024 and sell it today you would lose (359.00) from holding Toyota Industries or give up 4.7% of portfolio value over 90 days.

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

AmeraMex International  vs.  Toyota Industries

AmeraMex International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AmeraMex International 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 primary indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Toyota Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toyota Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Toyota Industries is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AmeraMex International and Toyota Industries

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

The idea behind AmeraMex International and Toyota Industries 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.