Correlation Between Toyota and Ita Unibanco

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

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

Diversification Opportunities for Toyota and Ita Unibanco

-0.82

Correlation Coefficient

Toyota  Ita Unibanco

Pay attention - limited upside

The 3 months correlation between Toyota and Ita is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor and Ita Unibanco Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ita Unibanco Holding 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 Ita Unibanco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ita Unibanco Holding has no effect on the direction of Toyota i.e., Toyota and Ita Unibanco go up and down completely randomly.

Pair Corralation between Toyota and Ita Unibanco

Assuming the 90 days trading horizon Toyota Motor is expected to generate 1.55 times more return on investment than Ita Unibanco. However, Toyota is 1.55 times more volatile than Ita Unibanco Holding. It trades about 0.05 of its potential returns per unit of risk. Ita Unibanco Holding is currently generating about 0.0 per unit of risk. If you would invest  6,282  in Toyota Motor on October 2, 2024 and sell it today you would earn a total of  1,294  from holding Toyota Motor or generate 20.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.13%
Values	Daily Returns

Toyota Motor  vs.  Ita Unibanco Holding

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 weak fundamental indicators, Toyota sustained solid returns over the last few months and may actually be approaching a breakup point.

Ita Unibanco Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ita Unibanco Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Preferred Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Toyota and Ita Unibanco

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

The idea behind Toyota Motor and Ita Unibanco Holding 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..