Correlation Between Amazon and Toyota
Can any of the company-specific risk be diversified away by investing in both Amazon and Toyota 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 Amazon and Toyota into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Toyota Motor Corp, you can compare the effects of market volatilities on Amazon and Toyota 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 Amazon with a short position of Toyota. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Toyota.
Diversification Opportunities for Amazon and Toyota
Very weak diversification
The 3 months correlation between Amazon and Toyota is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Toyota Motor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyota Motor Corp and Amazon 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 Amazon Inc are associated (or correlated) with Toyota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toyota Motor Corp has no effect on the direction of Amazon i.e., Amazon and Toyota go up and down completely randomly.
Pair Corralation between Amazon and Toyota
Assuming the 90 days trading horizon Amazon Inc is expected to generate 0.9 times more return on investment than Toyota. However, Amazon Inc is 1.11 times less risky than Toyota. It trades about 0.09 of its potential returns per unit of risk. Toyota Motor Corp is currently generating about 0.06 per unit of risk. If you would invest 9,735 in Amazon Inc on October 12, 2024 and sell it today you would earn a total of 12,515 from holding Amazon Inc or generate 128.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.18% |
| Values | Daily Returns |
Amazon Inc vs. Toyota Motor Corp
Performance |
| Timeline |
| Amazon Inc |
| Toyota Motor Corp |
Amazon and Toyota Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Toyota
The main advantage of trading using opposite Amazon and Toyota positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Toyota 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 Toyota will offset losses from the drop in Toyota's long position.| Amazon vs. Deltex Medical Group | Amazon vs. Cognizant Technology Solutions | Amazon vs. Cizzle Biotechnology Holdings | Amazon vs. JLEN Environmental Assets |
| Toyota vs. GreenX Metals | Toyota vs. European Metals Holdings | Toyota vs. Golden Metal Resources | Toyota vs. Premier Foods PLC |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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