Correlation Between TOYOTA and Marfrig Global

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

By analyzing existing cross correlation between TOYOTA 5067497 10 JAN 25 and Marfrig Global Foods, you can compare the effects of market volatilities on TOYOTA and Marfrig Global 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 Marfrig Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of TOYOTA and Marfrig Global.

Diversification Opportunities for TOYOTA and Marfrig Global

-0.41

Correlation Coefficient

TOYOTA  Marfrig Global

Very good diversification

The 3 months correlation between TOYOTA and Marfrig is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding TOYOTA 5067497 10 JAN 25 and Marfrig Global Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marfrig Global Foods 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 5067497 10 JAN 25 are associated (or correlated) with Marfrig Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marfrig Global Foods has no effect on the direction of TOYOTA i.e., TOYOTA and Marfrig Global go up and down completely randomly.

Pair Corralation between TOYOTA and Marfrig Global

Assuming the 90 days trading horizon TOYOTA 5067497 10 JAN 25 is expected to under-perform the Marfrig Global. But the bond apears to be less risky and, when comparing its historical volatility, TOYOTA 5067497 10 JAN 25 is 13.14 times less risky than Marfrig Global. The bond trades about -0.01 of its potential returns per unit of risk. The Marfrig Global Foods is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  256.00  in Marfrig Global Foods on September 14, 2024 and sell it today you would earn a total of  92.00  from holding Marfrig Global Foods or generate 35.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	49.21%
Values	Daily Returns

TOYOTA 5067497 10 JAN 25  vs.  Marfrig Global Foods

TOYOTA 5067497 10

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TOYOTA 5067497 10 JAN 25 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, TOYOTA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Marfrig Global Foods

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Marfrig Global Foods are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Marfrig Global showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TOYOTA and Marfrig Global

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

The idea behind TOYOTA 5067497 10 JAN 25 and Marfrig Global Foods 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.