Correlation Between Toyota and Lordstown Motors

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

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

Diversification Opportunities for Toyota and Lordstown Motors

0.49

Correlation Coefficient

Toyota  Lordstown Motors

Very weak diversification

The 3 months correlation between Toyota and Lordstown is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor and Lordstown Motors Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lordstown Motors 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 are associated (or correlated) with Lordstown Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lordstown Motors Corp has no effect on the direction of Toyota i.e., Toyota and Lordstown Motors go up and down completely randomly.

Pair Corralation between Toyota and Lordstown Motors

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	4.76%
Values	Daily Returns

Toyota Motor  vs.  Lordstown Motors Corp

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.

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.

Pair Trading with Toyota and Lordstown Motors

The main advantage of trading using opposite Toyota and Lordstown Motors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Toyota position performs unexpectedly, Lordstown Motors 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 Lordstown Motors will offset losses from the drop in Lordstown Motors' long position.

The idea behind Toyota Motor and Lordstown Motors Corp 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.