Correlation Between Toyota and GigaCloud Technology

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

By analyzing existing cross correlation between Toyota Motor and GigaCloud Technology Class, you can compare the effects of market volatilities on Toyota and GigaCloud Technology 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 GigaCloud Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toyota and GigaCloud Technology.

Diversification Opportunities for Toyota and GigaCloud Technology

-0.43

Correlation Coefficient

Toyota  GigaCloud Technology

Very good diversification

The 3 months correlation between Toyota and GigaCloud is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor and GigaCloud Technology Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigaCloud Technology 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 Motor are associated (or correlated) with GigaCloud Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GigaCloud Technology has no effect on the direction of Toyota i.e., Toyota and GigaCloud Technology go up and down completely randomly.

Pair Corralation between Toyota and GigaCloud Technology

Allowing for the 90-day total investment horizon Toyota Motor is expected to under-perform the GigaCloud Technology. But the stock apears to be less risky and, when comparing its historical volatility, Toyota Motor is 4.02 times less risky than GigaCloud Technology. The stock trades about -0.09 of its potential returns per unit of risk. The GigaCloud Technology Class is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,105  in GigaCloud Technology Class on September 1, 2024 and sell it today you would earn a total of  365.00  from holding GigaCloud Technology Class or generate 17.34% return on investment over 90 days.

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

Toyota Motor  vs.  GigaCloud Technology Class

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 unfluctuating performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

GigaCloud Technology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in GigaCloud Technology Class are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental indicators, GigaCloud Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Toyota and GigaCloud Technology

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

The idea behind Toyota Motor and GigaCloud Technology Class 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.