Correlation Between Fras Le and Toyota

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

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

Diversification Opportunities for Fras Le and Toyota

-0.39

Correlation Coefficient

Fras Le  Toyota

Very good diversification

The 3 months correlation between Fras and Toyota is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Fras le SA and Toyota Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyota Motor and Fras Le 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 Fras le SA 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 Fras Le i.e., Fras Le and Toyota go up and down completely randomly.

Pair Corralation between Fras Le and Toyota

Assuming the 90 days trading horizon Fras Le is expected to generate 4.39 times less return on investment than Toyota. But when comparing it to its historical volatility, Fras le SA is 1.26 times less risky than Toyota. It trades about 0.02 of its potential returns per unit of risk. Toyota Motor is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  6,339  in Toyota Motor on September 23, 2024 and sell it today you would earn a total of  465.00  from holding Toyota Motor or generate 7.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Fras le SA  vs.  Toyota Motor

Fras le SA

Risk-Adjusted Performance

1 of 100

Weak

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

Toyota Motor

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Toyota Motor are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, Toyota may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fras Le and Toyota

The main advantage of trading using opposite Fras Le and Toyota positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fras Le 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 Fras le SA 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.