Correlation Between Toyota and Arcontech Group

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

Diversification Opportunities for Toyota and Arcontech Group

-0.77

Correlation Coefficient

Toyota  Arcontech Group

Pay attention - limited upside

The 3 months correlation between Toyota and Arcontech is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor Corp and Arcontech Group Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arcontech Group Plc 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 Arcontech Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arcontech Group Plc has no effect on the direction of Toyota i.e., Toyota and Arcontech Group go up and down completely randomly.

Pair Corralation between Toyota and Arcontech Group

Assuming the 90 days trading horizon Toyota Motor Corp is expected to under-perform the Arcontech Group. In addition to that, Toyota is 1.21 times more volatile than Arcontech Group Plc. It trades about -0.05 of its total potential returns per unit of risk. Arcontech Group Plc is currently generating about 0.24 per unit of volatility. If you would invest  7,300  in Arcontech Group Plc on April 24, 2025 and sell it today you would earn a total of  1,650  from holding Arcontech Group Plc or generate 22.6% return on investment over 90 days.

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

Toyota Motor Corp  vs.  Arcontech Group Plc

Toyota Motor Corp

Risk-Adjusted Performance

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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Arcontech Group Plc

Risk-Adjusted Performance

Solid

Over the last 90 days Arcontech Group Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather weak technical and fundamental indicators, Arcontech Group exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Toyota and Arcontech Group

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

The idea behind Toyota Motor Corp and Arcontech Group Plc 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.