Correlation Between Toyota and Workhorse

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

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

Diversification Opportunities for Toyota and Workhorse

-0.11

Correlation Coefficient

Toyota  Workhorse

Good diversification

The 3 months correlation between Toyota and Workhorse is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor and Workhorse Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Workhorse Group 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 Workhorse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Workhorse Group has no effect on the direction of Toyota i.e., Toyota and Workhorse go up and down completely randomly.

Pair Corralation between Toyota and Workhorse

Allowing for the 90-day total investment horizon Toyota Motor is expected to generate 0.18 times more return on investment than Workhorse. However, Toyota Motor is 5.52 times less risky than Workhorse. It trades about -0.03 of its potential returns per unit of risk. Workhorse Group is currently generating about -0.23 per unit of risk. 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Toyota Motor  vs.  Workhorse Group

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.

Workhorse Group

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Workhorse Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical indicators, Workhorse unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Toyota and Workhorse

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

The idea behind Toyota Motor and Workhorse Group 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.