Correlation Between Lordstown Motors and Toyota

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

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

Diversification Opportunities for Lordstown Motors and Toyota

0.49

Correlation Coefficient

Lordstown Motors  Toyota

Very weak diversification

The 3 months correlation between Lordstown and Toyota is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Lordstown Motors Corp and Toyota Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyota Motor and Lordstown Motors 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 Lordstown Motors Corp 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 Lordstown Motors i.e., Lordstown Motors and Toyota go up and down completely randomly.

Pair Corralation between Lordstown Motors and Toyota

If you would invest  295.00  in Lordstown Motors Corp on September 19, 2024 and sell it today you would earn a total of  0.00  from holding Lordstown Motors Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.59%
Values	Daily Returns

Lordstown Motors Corp  vs.  Toyota Motor

Lordstown Motors Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lordstown Motors Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Lordstown Motors is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 Lordstown Motors and Toyota

The main advantage of trading using opposite Lordstown Motors and Toyota positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lordstown Motors 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 Lordstown Motors Corp 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.