Correlation Between Toyota and Argo Group

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

Diversification Opportunities for Toyota and Argo Group

0.03

Correlation Coefficient

Toyota  Argo Group

Significant diversification

The 3 months correlation between Toyota and Argo is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor Corp and Argo Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Argo Group Limited 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 Argo Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Argo Group Limited has no effect on the direction of Toyota i.e., Toyota and Argo Group go up and down completely randomly.

Pair Corralation between Toyota and Argo Group

Assuming the 90 days trading horizon Toyota is expected to generate 1.62 times less return on investment than Argo Group. But when comparing it to its historical volatility, Toyota Motor Corp is 1.12 times less risky than Argo Group. It trades about 0.15 of its potential returns per unit of risk. Argo Group Limited is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  375.00  in Argo Group Limited on September 24, 2024 and sell it today you would earn a total of  25.00  from holding Argo Group Limited or generate 6.67% return on investment over 90 days.

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

Toyota Motor Corp  vs.  Argo Group Limited

Toyota Motor Corp

Risk-Adjusted Performance

5 of 100

Modest

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

Argo Group Limited

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Toyota and Argo Group

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

The idea behind Toyota Motor Corp and Argo Group Limited 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.