Correlation Between Toyota and Comerica
Can any of the company-specific risk be diversified away by investing in both Toyota and Comerica 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 Comerica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Toyota Motor Corp and Comerica, you can compare the effects of market volatilities on Toyota and Comerica 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 Comerica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toyota and Comerica.
Diversification Opportunities for Toyota and Comerica
Poor diversification
The 3 months correlation between Toyota and Comerica is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor Corp and Comerica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Comerica 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 Corp are associated (or correlated) with Comerica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Comerica has no effect on the direction of Toyota i.e., Toyota and Comerica go up and down completely randomly.
Pair Corralation between Toyota and Comerica
Assuming the 90 days trading horizon Toyota Motor Corp is expected to generate 0.79 times more return on investment than Comerica. However, Toyota Motor Corp is 1.27 times less risky than Comerica. It trades about 0.04 of its potential returns per unit of risk. Comerica is currently generating about -0.14 per unit of risk. If you would invest 265,350 in Toyota Motor Corp on September 12, 2024 and sell it today you would earn a total of 2,600 from holding Toyota Motor Corp or generate 0.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Toyota Motor Corp vs. Comerica
Performance |
| Timeline |
| Toyota Motor Corp |
| Comerica |
Toyota and Comerica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toyota and Comerica
The main advantage of trading using opposite Toyota and Comerica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toyota position performs unexpectedly, Comerica 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 Comerica will offset losses from the drop in Comerica's long position.| Toyota vs. Various Eateries PLC | Toyota vs. OneSavings Bank PLC | Toyota vs. Skandinaviska Enskilda Banken | Toyota vs. Sydbank |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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