Correlation Between Tesla and Toyota
Can any of the company-specific risk be diversified away by investing in both Tesla 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 Tesla and Toyota into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesla Inc and Toyota Motor, you can compare the effects of market volatilities on Tesla 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 Tesla with a short position of Toyota. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and Toyota.
Diversification Opportunities for Tesla and Toyota
Very good diversification
The 3 months correlation between Tesla and Toyota is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Toyota Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyota Motor and Tesla 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 Tesla 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 has no effect on the direction of Tesla i.e., Tesla and Toyota go up and down completely randomly.
Pair Corralation between Tesla and Toyota
Assuming the 90 days trading horizon Tesla Inc is expected to generate 2.98 times more return on investment than Toyota. However, Tesla is 2.98 times more volatile than Toyota Motor. It trades about 0.15 of its potential returns per unit of risk. Toyota Motor is currently generating about -0.02 per unit of risk. If you would invest 511,105 in Tesla Inc on August 31, 2024 and sell it today you would earn a total of 173,895 from holding Tesla Inc or generate 34.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 54.76% |
| Values | Daily Returns |
Tesla Inc vs. Toyota Motor
Performance |
| Timeline |
| Tesla Inc |
| Toyota Motor |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Tesla and Toyota Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tesla and Toyota
The main advantage of trading using opposite Tesla and Toyota positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla 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.| Tesla vs. Southern Copper | Tesla vs. Ameriprise Financial | Tesla vs. Monster Beverage Corp | Tesla vs. Delta Air Lines |
| Toyota vs. United Airlines Holdings | Toyota vs. McEwen Mining | Toyota vs. Micron Technology | Toyota vs. Grupo Carso SAB |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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