Correlation Between Toyota and 3I Group

Can any of the company-specific risk be diversified away by investing in both Toyota and 3I Group 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 3I Group 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 3I Group PLC, you can compare the effects of market volatilities on Toyota and 3I Group 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 3I Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toyota and 3I Group.

Diversification Opportunities for Toyota and 3I Group

0.43

Correlation Coefficient

Toyota  3I Group

Very weak diversification

The 3 months correlation between Toyota and III is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor Corp and 3I Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3I Group PLC 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 3I Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3I Group PLC has no effect on the direction of Toyota i.e., Toyota and 3I Group go up and down completely randomly.

Pair Corralation between Toyota and 3I Group

Assuming the 90 days trading horizon Toyota Motor Corp is expected to under-perform the 3I Group. In addition to that, Toyota is 1.86 times more volatile than 3I Group PLC. It trades about -0.03 of its total potential returns per unit of risk. 3I Group PLC is currently generating about 0.09 per unit of volatility. If you would invest  306,575  in 3I Group PLC on September 26, 2024 and sell it today you would earn a total of  51,525  from holding 3I Group PLC or generate 16.81% return on investment over 90 days.

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

Toyota Motor Corp  vs.  3I Group PLC

Toyota Motor Corp

Risk-Adjusted Performance

2 of 100

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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

3I Group PLC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in 3I Group PLC 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, 3I Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Toyota and 3I Group

The main advantage of trading using opposite Toyota and 3I Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toyota position performs unexpectedly, 3I Group 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 3I Group will offset losses from the drop in 3I Group's long position.

The idea behind Toyota Motor Corp and 3I Group 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.