Correlation Between Toyota and Mazda

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

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

Diversification Opportunities for Toyota and Mazda

0.52

Correlation Coefficient

Toyota  Mazda

Very weak diversification

The 3 months correlation between Toyota and Mazda is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor Corp and Mazda Motor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mazda Motor 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 Corp are associated (or correlated) with Mazda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mazda Motor Corp has no effect on the direction of Toyota i.e., Toyota and Mazda go up and down completely randomly.

Pair Corralation between Toyota and Mazda

Assuming the 90 days horizon Toyota Motor Corp is expected to under-perform the Mazda. But the pink sheet apears to be less risky and, when comparing its historical volatility, Toyota Motor Corp is 1.0 times less risky than Mazda. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Mazda Motor Corp is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  334.00  in Mazda Motor Corp on December 29, 2024 and sell it today you would lose (11.00) from holding Mazda Motor Corp or give up 3.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Toyota Motor Corp  vs.  Mazda Motor Corp

Toyota Motor Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Toyota Motor Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Mazda Motor Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mazda Motor Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Mazda 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 Mazda

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

The idea behind Toyota Motor Corp and Mazda Motor 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.