Correlation Between Gencor Industries and Toyota Industries

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

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

Diversification Opportunities for Gencor Industries and Toyota Industries

-0.23

Correlation Coefficient

Gencor Industries  Toyota Industries

Very good diversification

The 3 months correlation between Gencor and Toyota is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Gencor Industries and Toyota Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyota Industries and Gencor Industries 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 Gencor Industries 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 Gencor Industries i.e., Gencor Industries and Toyota Industries go up and down completely randomly.

Pair Corralation between Gencor Industries and Toyota Industries

Given the investment horizon of 90 days Gencor Industries is expected to under-perform the Toyota Industries. In addition to that, Gencor Industries is 1.46 times more volatile than Toyota Industries. It trades about -0.15 of its total potential returns per unit of risk. Toyota Industries is currently generating about 0.11 per unit of volatility. If you would invest  8,214  in Toyota Industries on December 28, 2024 and sell it today you would earn a total of  1,108  from holding Toyota Industries or generate 13.49% return on investment over 90 days.

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

Gencor Industries  vs.  Toyota Industries

Gencor Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gencor Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Toyota Industries

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Toyota Industries are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental indicators, Toyota Industries showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gencor Industries and Toyota Industries

The main advantage of trading using opposite Gencor Industries and Toyota Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gencor Industries 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 Gencor Industries 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 Correlations module to find global opportunities by holding instruments from different markets.