Correlation Between Toyota and Universal Display

Can any of the company-specific risk be diversified away by investing in both Toyota and Universal Display 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 Universal Display 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 Universal Display Corp, you can compare the effects of market volatilities on Toyota and Universal Display 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 Universal Display. Check out your portfolio center. Please also check ongoing floating volatility patterns of Toyota and Universal Display.

Diversification Opportunities for Toyota and Universal Display

-0.63

Correlation Coefficient

Toyota  Universal Display

Excellent diversification

The 3 months correlation between Toyota and Universal is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor Corp and Universal Display Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Display 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 Universal Display. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Display Corp has no effect on the direction of Toyota i.e., Toyota and Universal Display go up and down completely randomly.

Pair Corralation between Toyota and Universal Display

Assuming the 90 days trading horizon Toyota Motor Corp is expected to generate 0.95 times more return on investment than Universal Display. However, Toyota Motor Corp is 1.05 times less risky than Universal Display. It trades about 0.06 of its potential returns per unit of risk. Universal Display Corp is currently generating about -0.06 per unit of risk. If you would invest  261,100  in Toyota Motor Corp on December 2, 2024 and sell it today you would earn a total of  17,300  from holding Toyota Motor Corp or generate 6.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.16%
Values	Daily Returns

Toyota Motor Corp  vs.  Universal Display Corp

Toyota Motor Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Toyota Motor Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Toyota may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Universal Display Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Universal Display Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Toyota and Universal Display

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

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