Correlation Between Toyota and Stellantis

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

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

Diversification Opportunities for Toyota and Stellantis

0.71

Correlation Coefficient

Toyota  Stellantis

Poor diversification

The 3 months correlation between Toyota and Stellantis is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Toyota Motor and Stellantis NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stellantis NV 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 Stellantis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stellantis NV has no effect on the direction of Toyota i.e., Toyota and Stellantis go up and down completely randomly.

Pair Corralation between Toyota and Stellantis

Allowing for the 90-day total investment horizon Toyota is expected to generate 1.92 times less return on investment than Stellantis. But when comparing it to its historical volatility, Toyota Motor is 1.51 times less risky than Stellantis. It trades about 0.06 of its potential returns per unit of risk. Stellantis NV is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,123  in Stellantis NV on February 16, 2024 and sell it today you would earn a total of  1,167  from holding Stellantis NV or generate 103.95% return on investment over 90 days.

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

Toyota Motor  vs.  Stellantis NV

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.

Stellantis NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stellantis NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Stellantis 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 Stellantis

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

The idea behind Toyota Motor and Stellantis NV 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.