Correlation Between Xeros Technology and Toyota

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

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

Diversification Opportunities for Xeros Technology and Toyota

-0.61

Correlation Coefficient

Xeros Technology  Toyota

Excellent diversification

The 3 months correlation between Xeros and Toyota is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Xeros Technology Group and Toyota Motor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyota Motor Corp and Xeros Technology 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 Xeros Technology Group 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 Corp has no effect on the direction of Xeros Technology i.e., Xeros Technology and Toyota go up and down completely randomly.

Pair Corralation between Xeros Technology and Toyota

Assuming the 90 days trading horizon Xeros Technology Group is expected to under-perform the Toyota. In addition to that, Xeros Technology is 1.93 times more volatile than Toyota Motor Corp. It trades about -0.09 of its total potential returns per unit of risk. Toyota Motor Corp is currently generating about 0.05 per unit of volatility. If you would invest  172,566  in Toyota Motor Corp on September 27, 2024 and sell it today you would earn a total of  104,584  from holding Toyota Motor Corp or generate 60.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.2%
Values	Daily Returns

Xeros Technology Group  vs.  Toyota Motor Corp

Xeros Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xeros Technology Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Toyota Motor Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Toyota Motor Corp are ranked lower than 1 (%) 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.

Pair Trading with Xeros Technology and Toyota

The main advantage of trading using opposite Xeros Technology and Toyota positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xeros Technology 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 Xeros Technology Group and Toyota Motor Corp 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.