Correlation Between Hoteles City and Toyota

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

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

Diversification Opportunities for Hoteles City and Toyota

0.16

Correlation Coefficient

Hoteles City  Toyota

Average diversification

The 3 months correlation between Hoteles and Toyota is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Hoteles City Express and Toyota Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyota Motor and Hoteles City 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 Hoteles City Express 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 Hoteles City i.e., Hoteles City and Toyota go up and down completely randomly.

Pair Corralation between Hoteles City and Toyota

Assuming the 90 days trading horizon Hoteles City Express is expected to under-perform the Toyota. But the stock apears to be less risky and, when comparing its historical volatility, Hoteles City Express is 1.89 times less risky than Toyota. The stock trades about -0.09 of its potential returns per unit of risk. The Toyota Motor is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest  365,000  in Toyota Motor on October 10, 2024 and sell it today you would earn a total of  36,000  from holding Toyota Motor or generate 9.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	26.32%
Values	Daily Returns

Hoteles City Express  vs.  Toyota Motor

Hoteles City Express

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hoteles City Express 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 very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Toyota Motor

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Toyota Motor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, Toyota showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hoteles City and Toyota

The main advantage of trading using opposite Hoteles City and Toyota positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hoteles City 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 Hoteles City Express 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.