Correlation Between Canoo and Toyota

Can any of the company-specific risk be diversified away by investing in both Canoo 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 Canoo and Toyota into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Canoo Inc and Toyota Motor, you can compare the effects of market volatilities on Canoo 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 Canoo with a short position of Toyota. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canoo and Toyota.

Diversification Opportunities for Canoo and Toyota

0.14

Correlation Coefficient

Canoo  Toyota

Average diversification

The 3 months correlation between Canoo and Toyota is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Canoo Inc and Toyota Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyota Motor and Canoo 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 Canoo 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 Canoo i.e., Canoo and Toyota go up and down completely randomly.

Pair Corralation between Canoo and Toyota

Given the investment horizon of 90 days Canoo Inc is expected to under-perform the Toyota. In addition to that, Canoo is 12.88 times more volatile than Toyota Motor. It trades about -0.38 of its total potential returns per unit of risk. Toyota Motor is currently generating about -0.03 per unit of volatility. If you would invest  17,478  in Toyota Motor on September 19, 2024 and sell it today you would lose (150.00) from holding Toyota Motor or give up 0.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Canoo Inc  vs.  Toyota Motor

Canoo Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Canoo Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Toyota Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Toyota Motor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Toyota is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Canoo and Toyota

The main advantage of trading using opposite Canoo and Toyota positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canoo 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.

The idea behind Canoo Inc and Toyota Motor 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.

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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.