Correlation Between Subaru Corp and Toyota

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

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

Diversification Opportunities for Subaru Corp and Toyota

0.4

Correlation Coefficient

Subaru Corp  Toyota

Very weak diversification

The 3 months correlation between Subaru and Toyota is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Subaru Corp ADR and Toyota Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyota Motor and Subaru 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 Subaru Corp ADR 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 Subaru Corp i.e., Subaru Corp and Toyota go up and down completely randomly.

Pair Corralation between Subaru Corp and Toyota

Assuming the 90 days horizon Subaru Corp is expected to generate 1.61 times less return on investment than Toyota. In addition to that, Subaru Corp is 1.12 times more volatile than Toyota Motor. It trades about 0.03 of its total potential returns per unit of risk. Toyota Motor is currently generating about 0.05 per unit of volatility. If you would invest  13,478  in Toyota Motor on October 3, 2024 and sell it today you would earn a total of  5,983  from holding Toyota Motor or generate 44.39% return on investment over 90 days.

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

Subaru Corp ADR  vs.  Toyota Motor

Subaru Corp ADR

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Subaru Corp ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, Subaru Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Toyota Motor

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Toyota Motor are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Toyota may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Subaru Corp and Toyota

The main advantage of trading using opposite Subaru Corp and Toyota positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Subaru 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 Subaru Corp ADR 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.