Correlation Between Ricoh Co and Toyota

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

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

Diversification Opportunities for Ricoh Co and Toyota

0.65

Correlation Coefficient

Ricoh Co  Toyota

Poor diversification

The 3 months correlation between Ricoh and Toyota is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Ricoh Co 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 Ricoh Co 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 Ricoh Co 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 Ricoh Co i.e., Ricoh Co and Toyota go up and down completely randomly.

Pair Corralation between Ricoh Co and Toyota

Assuming the 90 days trading horizon Ricoh Co is expected to generate 0.82 times more return on investment than Toyota. However, Ricoh Co is 1.22 times less risky than Toyota. It trades about -0.08 of its potential returns per unit of risk. Toyota Motor Corp is currently generating about -0.07 per unit of risk. If you would invest  177,800  in Ricoh Co on December 30, 2024 and sell it today you would lose (17,600) from holding Ricoh Co or give up 9.9% of portfolio value over 90 days.

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

Ricoh Co  vs.  Toyota Motor Corp

Ricoh Co

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ricoh Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Toyota Motor Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Toyota Motor Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Ricoh Co and Toyota

The main advantage of trading using opposite Ricoh Co and Toyota positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ricoh Co 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 Ricoh Co 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.