Correlation Between Toyota and Nissan

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

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

Diversification Opportunities for Toyota and Nissan

0.0

Correlation Coefficient

Toyota  Nissan

Pay attention - limited upside

The 3 months correlation between Toyota and Nissan is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor and Nissan Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nissan Motor 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 Nissan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nissan Motor has no effect on the direction of Toyota i.e., Toyota and Nissan go up and down completely randomly.

Pair Corralation between Toyota and Nissan

If you would invest (100.00) in Nissan Motor Co on December 28, 2024 and sell it today you would earn a total of  100.00  from holding Nissan Motor Co or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Toyota Motor  vs.  Nissan Motor Co

Toyota Motor

Risk-Adjusted Performance

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 latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Nissan Motor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nissan Motor Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Nissan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Toyota and Nissan

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

The idea behind Toyota Motor and Nissan Motor Co 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.

Check out your portfolio center.

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.