Correlation Between GM and TOYOTA
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By analyzing existing cross correlation between General Motors and TOYOTA MTR CR, you can compare the effects of market volatilities on GM 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 GM with a short position of TOYOTA. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and TOYOTA.
Diversification Opportunities for GM and TOYOTA
Significant diversification
The 3 months correlation between GM and TOYOTA is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and TOYOTA MTR CR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOYOTA MTR CR and GM 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 General Motors 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 MTR CR has no effect on the direction of GM i.e., GM and TOYOTA go up and down completely randomly.
Pair Corralation between GM and TOYOTA
Allowing for the 90-day total investment horizon General Motors is expected to generate 3.28 times more return on investment than TOYOTA. However, GM is 3.28 times more volatile than TOYOTA MTR CR. It trades about 0.05 of its potential returns per unit of risk. TOYOTA MTR CR is currently generating about 0.05 per unit of risk. If you would invest 3,757 in General Motors on August 30, 2024 and sell it today you would earn a total of 1,793 from holding General Motors or generate 47.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 87.68% |
| Values | Daily Returns |
General Motors vs. TOYOTA MTR CR
Performance |
| Timeline |
| General Motors |
| TOYOTA MTR CR |
GM and TOYOTA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and TOYOTA
The main advantage of trading using opposite GM and TOYOTA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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.The idea behind General Motors and TOYOTA MTR CR 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.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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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