Correlation Between Vanguard World and Toyota

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

By analyzing existing cross correlation between Vanguard World and Toyota Motor, you can compare the effects of market volatilities on Vanguard World and Toyota 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 Vanguard World with a short position of Toyota. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard World and Toyota.

Diversification Opportunities for Vanguard World and Toyota

-0.19

Correlation Coefficient

Vanguard World  Toyota

Good diversification

The 3 months correlation between Vanguard and Toyota is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard World and Toyota Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyota Motor and Vanguard World 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 Vanguard World are associated (or correlated) with Toyota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toyota Motor has no effect on the direction of Vanguard World i.e., Vanguard World and Toyota go up and down completely randomly.

Pair Corralation between Vanguard World and Toyota

Assuming the 90 days trading horizon Vanguard World is expected to generate 0.48 times more return on investment than Toyota. However, Vanguard World is 2.1 times less risky than Toyota. It trades about -0.09 of its potential returns per unit of risk. Toyota Motor is currently generating about -0.05 per unit of risk. If you would invest  551,304  in Vanguard World on September 18, 2024 and sell it today you would lose (30,404) from holding Vanguard World or give up 5.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	49.18%
Values	Daily Returns

Vanguard World  vs.  Toyota Motor

Vanguard World

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard World has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Vanguard World is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Toyota Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toyota Motor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Vanguard World and Toyota

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

The idea behind Vanguard World and Toyota Motor 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.