Correlation Between Pets At and Toyota

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

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

Diversification Opportunities for Pets At and Toyota

-0.39

Correlation Coefficient

Pets At  Toyota

Very good diversification

The 3 months correlation between Pets and Toyota is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Pets at Home 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 Pets At 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 Pets at Home 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 Pets At i.e., Pets At and Toyota go up and down completely randomly.

Pair Corralation between Pets At and Toyota

Assuming the 90 days trading horizon Pets at Home is expected to under-perform the Toyota. In addition to that, Pets At is 2.81 times more volatile than Toyota Motor Corp. It trades about -0.3 of its total potential returns per unit of risk. Toyota Motor Corp is currently generating about -0.03 per unit of volatility. If you would invest  270,400  in Toyota Motor Corp on September 19, 2024 and sell it today you would lose (3,150) from holding Toyota Motor Corp or give up 1.16% of portfolio value over 90 days.

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

Pets at Home  vs.  Toyota Motor Corp

Pets at Home

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pets at Home has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Toyota Motor Corp

Risk-Adjusted Performance

3 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Toyota Motor Corp are ranked lower than 3 (%) 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 Pets At and Toyota

The main advantage of trading using opposite Pets At and Toyota positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pets At 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 Pets at Home 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.