Correlation Between Toyota and Elmos Semiconductor

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

Diversification Opportunities for Toyota and Elmos Semiconductor

0.38

Correlation Coefficient

Toyota  Elmos Semiconductor

Weak diversification

The 3 months correlation between Toyota and Elmos is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor Corp and Elmos Semiconductor SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elmos Semiconductor 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 Elmos Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elmos Semiconductor has no effect on the direction of Toyota i.e., Toyota and Elmos Semiconductor go up and down completely randomly.

Pair Corralation between Toyota and Elmos Semiconductor

Assuming the 90 days trading horizon Toyota Motor Corp is expected to under-perform the Elmos Semiconductor. But the stock apears to be less risky and, when comparing its historical volatility, Toyota Motor Corp is 1.36 times less risky than Elmos Semiconductor. The stock trades about -0.07 of its potential returns per unit of risk. The Elmos Semiconductor SE is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  6,860  in Elmos Semiconductor SE on December 30, 2024 and sell it today you would lose (820.00) from holding Elmos Semiconductor SE or give up 11.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Toyota Motor Corp  vs.  Elmos Semiconductor SE

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. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Elmos Semiconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Elmos Semiconductor SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain 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 Elmos Semiconductor

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

The idea behind Toyota Motor Corp and Elmos Semiconductor SE 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.