Correlation Between Toyota and Mitie Group

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

Diversification Opportunities for Toyota and Mitie Group

0.15

Correlation Coefficient

Toyota  Mitie Group

Average diversification

The 3 months correlation between Toyota and Mitie is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor Corp and Mitie Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitie 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 Mitie Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitie Group PLC has no effect on the direction of Toyota i.e., Toyota and Mitie Group go up and down completely randomly.

Pair Corralation between Toyota and Mitie Group

Assuming the 90 days trading horizon Toyota is expected to generate 1.04 times less return on investment than Mitie Group. In addition to that, Toyota is 1.81 times more volatile than Mitie Group PLC. It trades about 0.06 of its total potential returns per unit of risk. Mitie Group PLC is currently generating about 0.11 per unit of volatility. If you would invest  10,772  in Mitie Group PLC on December 2, 2024 and sell it today you would earn a total of  868.00  from holding Mitie Group PLC or generate 8.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Toyota Motor Corp  vs.  Mitie Group PLC

Toyota Motor Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Toyota Motor Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Toyota may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Mitie Group PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mitie Group PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Mitie Group may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Toyota and Mitie Group

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

The idea behind Toyota Motor Corp and Mitie 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 Commodity Directory module to find actively traded commodities issued by global exchanges.