Correlation Between Guangzhou Automobile and Honda
Can any of the company-specific risk be diversified away by investing in both Guangzhou Automobile and Honda 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 Guangzhou Automobile and Honda into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guangzhou Automobile Group and Honda Motor Co, you can compare the effects of market volatilities on Guangzhou Automobile and Honda 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 Guangzhou Automobile with a short position of Honda. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangzhou Automobile and Honda.
Diversification Opportunities for Guangzhou Automobile and Honda
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Guangzhou and Honda is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Guangzhou Automobile Group and Honda Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honda Motor and Guangzhou Automobile 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 Guangzhou Automobile Group are associated (or correlated) with Honda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Honda Motor has no effect on the direction of Guangzhou Automobile i.e., Guangzhou Automobile and Honda go up and down completely randomly.
Pair Corralation between Guangzhou Automobile and Honda
Assuming the 90 days horizon Guangzhou Automobile Group is expected to generate 4.53 times more return on investment than Honda. However, Guangzhou Automobile is 4.53 times more volatile than Honda Motor Co. It trades about 0.03 of its potential returns per unit of risk. Honda Motor Co is currently generating about -0.03 per unit of risk. If you would invest 47.00 in Guangzhou Automobile Group on August 24, 2024 and sell it today you would lose (3.00) from holding Guangzhou Automobile Group or give up 6.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 80.0% |
| Values | Daily Returns |
Guangzhou Automobile Group vs. Honda Motor Co
Performance |
| Timeline |
| Guangzhou Automobile |
| Honda Motor |
Guangzhou Automobile and Honda Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guangzhou Automobile and Honda
The main advantage of trading using opposite Guangzhou Automobile and Honda positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangzhou Automobile position performs unexpectedly, Honda 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 Honda will offset losses from the drop in Honda's long position.| Guangzhou Automobile vs. Great Wall Motor | Guangzhou Automobile vs. Dongfeng Group | Guangzhou Automobile vs. Great Wall Motor | Guangzhou Automobile vs. BAIC Motor |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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