Correlation Between Toyota and Huntington Ingalls

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

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

Diversification Opportunities for Toyota and Huntington Ingalls

-0.46

Correlation Coefficient

Toyota  Huntington Ingalls

Very good diversification

The 3 months correlation between Toyota and Huntington is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor and Huntington Ingalls Industries, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huntington Ingalls 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 Huntington Ingalls. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huntington Ingalls has no effect on the direction of Toyota i.e., Toyota and Huntington Ingalls go up and down completely randomly.

Pair Corralation between Toyota and Huntington Ingalls

Assuming the 90 days trading horizon Toyota Motor is expected to generate 0.93 times more return on investment than Huntington Ingalls. However, Toyota Motor is 1.08 times less risky than Huntington Ingalls. It trades about 0.25 of its potential returns per unit of risk. Huntington Ingalls Industries, is currently generating about 0.03 per unit of risk. If you would invest  6,060  in Toyota Motor on October 7, 2024 and sell it today you would earn a total of  1,543  from holding Toyota Motor or generate 25.46% return on investment over 90 days.

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

Toyota Motor  vs.  Huntington Ingalls Industries,

Toyota Motor

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Toyota Motor are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Toyota sustained solid returns over the last few months and may actually be approaching a breakup point.

Huntington Ingalls

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huntington Ingalls Industries, 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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Toyota and Huntington Ingalls

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

The idea behind Toyota Motor and Huntington Ingalls 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.

Check out your portfolio center.

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.