Correlation Between Toyota and Suzano SA

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

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

Diversification Opportunities for Toyota and Suzano SA

0.73

Correlation Coefficient

Toyota  Suzano SA

Poor diversification

The 3 months correlation between Toyota and Suzano is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor and Suzano SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzano SA 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 Suzano SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzano SA has no effect on the direction of Toyota i.e., Toyota and Suzano SA go up and down completely randomly.

Pair Corralation between Toyota and Suzano SA

Assuming the 90 days trading horizon Toyota is expected to generate 7.05 times less return on investment than Suzano SA. In addition to that, Toyota is 1.05 times more volatile than Suzano SA. It trades about 0.01 of its total potential returns per unit of risk. Suzano SA is currently generating about 0.11 per unit of volatility. If you would invest  4,803  in Suzano SA on September 22, 2024 and sell it today you would earn a total of  1,267  from holding Suzano SA or generate 26.38% return on investment over 90 days.

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

Toyota Motor  vs.  Suzano SA

Toyota Motor

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Toyota Motor are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Toyota may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Suzano SA

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Suzano SA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Suzano SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Toyota and Suzano SA

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

The idea behind Toyota Motor and Suzano SA 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.