Correlation Between Toyota and Blue Bird
Can any of the company-specific risk be diversified away by investing in both Toyota and Blue Bird 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 Blue Bird into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Toyota Motor and Blue Bird Corp, you can compare the effects of market volatilities on Toyota and Blue Bird 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 Blue Bird. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toyota and Blue Bird.
Diversification Opportunities for Toyota and Blue Bird
Poor diversification
The 3 months correlation between Toyota and Blue is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor and Blue Bird Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Bird Corp 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 Blue Bird. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Bird Corp has no effect on the direction of Toyota i.e., Toyota and Blue Bird go up and down completely randomly.
Pair Corralation between Toyota and Blue Bird
Allowing for the 90-day total investment horizon Toyota Motor is expected to generate 0.41 times more return on investment than Blue Bird. However, Toyota Motor is 2.45 times less risky than Blue Bird. It trades about -0.05 of its potential returns per unit of risk. Blue Bird Corp is currently generating about -0.04 per unit of risk. If you would invest 17,663 in Toyota Motor on August 27, 2024 and sell it today you would lose (223.00) from holding Toyota Motor or give up 1.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Toyota Motor vs. Blue Bird Corp
Performance |
| Timeline |
| Toyota Motor |
| Blue Bird Corp |
Toyota and Blue Bird Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toyota and Blue Bird
The main advantage of trading using opposite Toyota and Blue Bird positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toyota position performs unexpectedly, Blue Bird 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 Blue Bird will offset losses from the drop in Blue Bird's long position.The idea behind Toyota Motor and Blue Bird Corp 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.| Blue Bird vs. Vicinity Motor Corp | Blue Bird vs. AYRO Inc | Blue Bird vs. Canoo Inc | Blue Bird vs. Hyzon Motors |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
Other Complementary Tools
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. |