Correlation Between Toyota and Light Science
Can any of the company-specific risk be diversified away by investing in both Toyota and Light Science 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 Light Science 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 Light Science Technologies, you can compare the effects of market volatilities on Toyota and Light Science 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 Light Science. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toyota and Light Science.
Diversification Opportunities for Toyota and Light Science
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Toyota and Light is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor Corp and Light Science Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Light Science Techno 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 Light Science. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Light Science Techno has no effect on the direction of Toyota i.e., Toyota and Light Science go up and down completely randomly.
Pair Corralation between Toyota and Light Science
Assuming the 90 days trading horizon Toyota Motor Corp is expected to generate 0.4 times more return on investment than Light Science. However, Toyota Motor Corp is 2.47 times less risky than Light Science. It trades about -0.41 of its potential returns per unit of risk. Light Science Technologies is currently generating about -0.32 per unit of risk. If you would invest 314,600 in Toyota Motor Corp on October 29, 2024 and sell it today you would lose (26,350) from holding Toyota Motor Corp or give up 8.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Toyota Motor Corp vs. Light Science Technologies
Performance |
| Timeline |
| Toyota Motor Corp |
| Light Science Techno |
Toyota and Light Science Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Toyota and Light Science
The main advantage of trading using opposite Toyota and Light Science positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toyota position performs unexpectedly, Light Science 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 Light Science will offset losses from the drop in Light Science's long position.| Toyota vs. Advanced Medical Solutions | Toyota vs. UNIQA Insurance Group | Toyota vs. Nordea Bank Abp | Toyota vs. TBC Bank Group |
| Light Science vs. Grieg Seafood | Light Science vs. Golden Metal Resources | Light Science vs. Bell Food Group | Light Science vs. Edita Food Industries |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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