Correlation Between Toyota and Daimler AG

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

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

Diversification Opportunities for Toyota and Daimler AG

0.0

Correlation Coefficient

Toyota  Daimler AG

Pay attention - limited upside

The 3 months correlation between Toyota and Daimler is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor and Daimler AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daimler AG ADR 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 Daimler AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daimler AG ADR has no effect on the direction of Toyota i.e., Toyota and Daimler AG go up and down completely randomly.

Pair Corralation between Toyota and Daimler AG

If you would invest (100.00) in Daimler AG ADR on February 7, 2024 and sell it today you would earn a total of  100.00  from holding Daimler AG ADR or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Toyota Motor  vs.  Daimler AG ADR

Toyota Motor

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Toyota Motor are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Toyota is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Daimler AG ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daimler AG ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Daimler AG is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Toyota and Daimler AG

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

The idea behind Toyota Motor and Daimler AG ADR 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.