Correlation Between Toyota and Li AutoInc
Can any of the company-specific risk be diversified away by investing in both Toyota and Li AutoInc 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 Li AutoInc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Toyota Motor and Li AutoInc, you can compare the effects of market volatilities on Toyota and Li AutoInc 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 Li AutoInc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toyota and Li AutoInc.
Diversification Opportunities for Toyota and Li AutoInc
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Toyota and Li AutoInc is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor and Li AutoInc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Li AutoInc 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 Li AutoInc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Li AutoInc has no effect on the direction of Toyota i.e., Toyota and Li AutoInc go up and down completely randomly.
Pair Corralation between Toyota and Li AutoInc
Allowing for the 90-day total investment horizon Toyota Motor is expected to generate 0.41 times more return on investment than Li AutoInc. However, Toyota Motor is 2.44 times less risky than Li AutoInc. It trades about 0.12 of its potential returns per unit of risk. Li AutoInc is currently generating about -0.04 per unit of risk. If you would invest 17,852 in Toyota Motor on January 24, 2024 and sell it today you would earn a total of 5,178 from holding Toyota Motor or generate 29.01% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Toyota Motor vs. Li AutoInc
Performance |
Timeline |
Toyota Motor |
Li AutoInc |
Toyota and Li AutoInc Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Toyota and Li AutoInc
The main advantage of trading using opposite Toyota and Li AutoInc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toyota position performs unexpectedly, Li AutoInc 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 Li AutoInc will offset losses from the drop in Li AutoInc's long position.The idea behind Toyota Motor and Li AutoInc 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.Li AutoInc vs. Nio Class A | Li AutoInc vs. Rivian Automotive | Li AutoInc vs. Lucid Group | Li AutoInc vs. Tesla Inc |
Check out your portfolio center.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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
Other Complementary Tools
Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
Fundamental Analysis View fundamental data based on most recent published financial statements | |
Bonds Directory Find actively traded corporate debentures issued by US companies | |
Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals |