Correlation Between Toyota and Finnair Oyj

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

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

Diversification Opportunities for Toyota and Finnair Oyj

-0.27

Correlation Coefficient

Toyota  Finnair Oyj

Very good diversification

The 3 months correlation between Toyota and Finnair is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor Corp and Finnair Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finnair Oyj 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 Corp are associated (or correlated) with Finnair Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finnair Oyj has no effect on the direction of Toyota i.e., Toyota and Finnair Oyj go up and down completely randomly.

Pair Corralation between Toyota and Finnair Oyj

Assuming the 90 days trading horizon Toyota Motor Corp is expected to generate 1.13 times more return on investment than Finnair Oyj. However, Toyota is 1.13 times more volatile than Finnair Oyj. It trades about 0.01 of its potential returns per unit of risk. Finnair Oyj is currently generating about -0.07 per unit of risk. If you would invest  264,458  in Toyota Motor Corp on September 4, 2024 and sell it today you would lose (2,026) from holding Toyota Motor Corp or give up 0.77% of portfolio value over 90 days.

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

Toyota Motor Corp  vs.  Finnair Oyj

Toyota Motor Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toyota Motor Corp has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Finnair Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Finnair Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Toyota and Finnair Oyj

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

The idea behind Toyota Motor Corp and Finnair Oyj 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.