Correlation Between Toyota and Equinix

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

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

Diversification Opportunities for Toyota and Equinix

0.58

Correlation Coefficient

Toyota  Equinix

Very weak diversification

The 3 months correlation between Toyota and Equinix is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor and Equinix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinix 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 Equinix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinix has no effect on the direction of Toyota i.e., Toyota and Equinix go up and down completely randomly.

Pair Corralation between Toyota and Equinix

Assuming the 90 days trading horizon Toyota Motor is expected to generate 1.11 times more return on investment than Equinix. However, Toyota is 1.11 times more volatile than Equinix. It trades about -0.08 of its potential returns per unit of risk. Equinix is currently generating about -0.17 per unit of risk. If you would invest  7,610  in Toyota Motor on December 26, 2024 and sell it today you would lose (715.00) from holding Toyota Motor or give up 9.4% of portfolio value over 90 days.

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

Toyota Motor  vs.  Equinix

Toyota Motor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Toyota Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Equinix

Risk-Adjusted Performance

Very Weak

Over the last 90 days Equinix has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Toyota and Equinix

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

The idea behind Toyota Motor and Equinix 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.