Correlation Between Toyota and Fisker

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

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

Diversification Opportunities for Toyota and Fisker

-0.16

Correlation Coefficient

Toyota  Fisker

Good diversification

The 3 months correlation between Toyota and Fisker is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor and Fisker Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fisker Inc 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 Fisker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fisker Inc has no effect on the direction of Toyota i.e., Toyota and Fisker go up and down completely randomly.

Pair Corralation between Toyota and Fisker

Allowing for the 90-day total investment horizon Toyota is expected to generate 1.05 times less return on investment than Fisker. But when comparing it to its historical volatility, Toyota Motor is 3.84 times less risky than Fisker. It trades about 0.05 of its potential returns per unit of risk. Fisker Inc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  700.00  in Fisker Inc on September 19, 2024 and sell it today you would lose (85.00) from holding Fisker Inc or give up 12.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	28.43%
Values	Daily Returns

Toyota Motor  vs.  Fisker Inc

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.

Fisker Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fisker Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Fisker is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Toyota and Fisker

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

The idea behind Toyota Motor and Fisker Inc 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.