Correlation Between Toyota and St Galler

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

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

Diversification Opportunities for Toyota and St Galler

-0.4

Correlation Coefficient

Toyota  St Galler

Very good diversification

The 3 months correlation between Toyota and 0QQZ is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor Corp and St Galler Kantonalbank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on St Galler Kantonalbank 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 Corp are associated (or correlated) with St Galler. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of St Galler Kantonalbank has no effect on the direction of Toyota i.e., Toyota and St Galler go up and down completely randomly.

Pair Corralation between Toyota and St Galler

Assuming the 90 days trading horizon Toyota is expected to generate 2.95 times less return on investment than St Galler. In addition to that, Toyota is 3.05 times more volatile than St Galler Kantonalbank. It trades about 0.03 of its total potential returns per unit of risk. St Galler Kantonalbank is currently generating about 0.26 per unit of volatility. If you would invest  42,850  in St Galler Kantonalbank on December 23, 2024 and sell it today you would earn a total of  5,250  from holding St Galler Kantonalbank or generate 12.25% 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 Corp  vs.  St Galler Kantonalbank

Toyota Motor Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Toyota Motor Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Toyota is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

St Galler Kantonalbank

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in St Galler Kantonalbank are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, St Galler may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Toyota and St Galler

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

The idea behind Toyota Motor Corp and St Galler Kantonalbank 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.