Correlation Between Toyota and Sabre Insurance

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

Diversification Opportunities for Toyota and Sabre Insurance

0.08

Correlation Coefficient

Toyota  Sabre Insurance

Significant diversification

The 3 months correlation between Toyota and Sabre is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor Corp and Sabre Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sabre Insurance Group 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 Sabre Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sabre Insurance Group has no effect on the direction of Toyota i.e., Toyota and Sabre Insurance go up and down completely randomly.

Pair Corralation between Toyota and Sabre Insurance

Assuming the 90 days trading horizon Toyota Motor Corp is expected to generate 1.21 times more return on investment than Sabre Insurance. However, Toyota is 1.21 times more volatile than Sabre Insurance Group. It trades about 0.13 of its potential returns per unit of risk. Sabre Insurance Group is currently generating about 0.02 per unit of risk. If you would invest  254,500  in Toyota Motor Corp on October 22, 2024 and sell it today you would earn a total of  42,500  from holding Toyota Motor Corp or generate 16.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Toyota Motor Corp  vs.  Sabre Insurance Group

Toyota Motor Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Toyota Motor Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Toyota exhibited solid returns over the last few months and may actually be approaching a breakup point.

Sabre Insurance Group

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sabre Insurance Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Sabre Insurance is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Toyota and Sabre Insurance

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

The idea behind Toyota Motor Corp and Sabre Insurance Group 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 Transaction History module to view history of all your transactions and understand their impact on performance.