Correlation Between Toyota and Westlake Chemical
Can any of the company-specific risk be diversified away by investing in both Toyota and Westlake Chemical 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 Westlake Chemical 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 Westlake Chemical Corp, you can compare the effects of market volatilities on Toyota and Westlake Chemical 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 Westlake Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toyota and Westlake Chemical.
Diversification Opportunities for Toyota and Westlake Chemical
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Toyota and Westlake is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor Corp and Westlake Chemical Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westlake Chemical 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 Corp are associated (or correlated) with Westlake Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westlake Chemical Corp has no effect on the direction of Toyota i.e., Toyota and Westlake Chemical go up and down completely randomly.
Pair Corralation between Toyota and Westlake Chemical
Assuming the 90 days trading horizon Toyota Motor Corp is expected to generate 0.69 times more return on investment than Westlake Chemical. However, Toyota Motor Corp is 1.44 times less risky than Westlake Chemical. It trades about 0.11 of its potential returns per unit of risk. Westlake Chemical Corp is currently generating about -0.05 per unit of risk. If you would invest 260,250 in Toyota Motor Corp on August 26, 2024 and sell it today you would earn a total of 6,200 from holding Toyota Motor Corp or generate 2.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Toyota Motor Corp vs. Westlake Chemical Corp
Performance |
| Timeline |
| Toyota Motor Corp |
| Westlake Chemical Corp |
Toyota and Westlake Chemical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toyota and Westlake Chemical
The main advantage of trading using opposite Toyota and Westlake Chemical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toyota position performs unexpectedly, Westlake Chemical 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 Westlake Chemical will offset losses from the drop in Westlake Chemical's long position.| Toyota vs. Synchrony Financial | Toyota vs. St Galler Kantonalbank | Toyota vs. Prudential Financial | Toyota vs. Bank of Ireland |
| Westlake Chemical vs. Samsung Electronics Co | Westlake Chemical vs. Samsung Electronics Co | Westlake Chemical vs. Hyundai Motor | Westlake Chemical vs. Toyota Motor Corp |
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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