Correlation Between Toyota and Concurrent Technologies

Can any of the company-specific risk be diversified away by investing in both Toyota and Concurrent Technologies 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 Concurrent Technologies 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 Concurrent Technologies Plc, you can compare the effects of market volatilities on Toyota and Concurrent Technologies 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 Concurrent Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toyota and Concurrent Technologies.

Diversification Opportunities for Toyota and Concurrent Technologies

0.5

Correlation Coefficient

Toyota  Concurrent Technologies

Very weak diversification

The 3 months correlation between Toyota and Concurrent is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor Corp and Concurrent Technologies Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Concurrent Technologies 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 Concurrent Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Concurrent Technologies has no effect on the direction of Toyota i.e., Toyota and Concurrent Technologies go up and down completely randomly.

Pair Corralation between Toyota and Concurrent Technologies

Assuming the 90 days trading horizon Toyota is expected to generate 1.68 times less return on investment than Concurrent Technologies. But when comparing it to its historical volatility, Toyota Motor Corp is 1.69 times less risky than Concurrent Technologies. It trades about 0.08 of its potential returns per unit of risk. Concurrent Technologies Plc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  12,225  in Concurrent Technologies Plc on September 12, 2024 and sell it today you would earn a total of  1,525  from holding Concurrent Technologies Plc or generate 12.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Toyota Motor Corp  vs.  Concurrent Technologies Plc

Toyota Motor Corp

Risk-Adjusted Performance

5 of 100

Modest

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

Concurrent Technologies

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Concurrent Technologies Plc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Concurrent Technologies exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Toyota and Concurrent Technologies

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

The idea behind Toyota Motor Corp and Concurrent Technologies Plc 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.