Correlation Between Toyota and Winnebago Industries

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

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

Diversification Opportunities for Toyota and Winnebago Industries

-0.64

Correlation Coefficient

Toyota  Winnebago Industries

Excellent diversification

The 3 months correlation between Toyota and Winnebago is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor and Winnebago Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Winnebago Industries and Toyota 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 Toyota Motor are associated (or correlated) with Winnebago Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Winnebago Industries has no effect on the direction of Toyota i.e., Toyota and Winnebago Industries go up and down completely randomly.

Pair Corralation between Toyota and Winnebago Industries

Allowing for the 90-day total investment horizon Toyota Motor is expected to generate 0.67 times more return on investment than Winnebago Industries. However, Toyota Motor is 1.48 times less risky than Winnebago Industries. It trades about 0.05 of its potential returns per unit of risk. Winnebago Industries is currently generating about -0.08 per unit of risk. If you would invest  18,350  in Toyota Motor on October 3, 2024 and sell it today you would earn a total of  1,111  from holding Toyota Motor or generate 6.05% return on investment over 90 days.

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

Toyota Motor  vs.  Winnebago Industries

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.

Winnebago Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Winnebago Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental 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.

Pair Trading with Toyota and Winnebago Industries

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

The idea behind Toyota Motor and Winnebago 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.