Correlation Between Toyota and Humana

Can any of the company-specific risk be diversified away by investing in both Toyota and Humana 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 Humana 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 Humana Inc, you can compare the effects of market volatilities on Toyota and Humana 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 Humana. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toyota and Humana.

Diversification Opportunities for Toyota and Humana

0.11

Correlation Coefficient

Toyota  Humana

Average diversification

The 3 months correlation between Toyota and Humana is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor Corp and Humana Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humana Inc 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 Humana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Humana Inc has no effect on the direction of Toyota i.e., Toyota and Humana go up and down completely randomly.

Pair Corralation between Toyota and Humana

Assuming the 90 days trading horizon Toyota Motor Corp is expected to generate 0.64 times more return on investment than Humana. However, Toyota Motor Corp is 1.56 times less risky than Humana. It trades about -0.02 of its potential returns per unit of risk. Humana Inc is currently generating about -0.06 per unit of risk. If you would invest  277,958  in Toyota Motor Corp on August 31, 2024 and sell it today you would lose (11,508) from holding Toyota Motor Corp or give up 4.14% of portfolio value over 90 days.

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

Toyota Motor Corp  vs.  Humana Inc

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.

Humana Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Humana Inc 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 basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Toyota and Humana

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

The idea behind Toyota Motor Corp and Humana Inc 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.