Correlation Between GreenPower and Honda
Can any of the company-specific risk be diversified away by investing in both GreenPower 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 GreenPower and Honda into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GreenPower Motor and Honda Motor Co, you can compare the effects of market volatilities on GreenPower 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 GreenPower with a short position of Honda. Check out your portfolio center. Please also check ongoing floating volatility patterns of GreenPower and Honda.
Diversification Opportunities for GreenPower and Honda
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between GreenPower and Honda is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding GreenPower Motor and Honda Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honda Motor and GreenPower 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 GreenPower Motor 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 GreenPower i.e., GreenPower and Honda go up and down completely randomly.
Pair Corralation between GreenPower and Honda
Allowing for the 90-day total investment horizon GreenPower Motor is expected to under-perform the Honda. But the stock apears to be less risky and, when comparing its historical volatility, GreenPower Motor is 8.57 times less risky than Honda. The stock trades about -0.02 of its potential returns per unit of risk. The Honda Motor Co is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 723.00 in Honda Motor Co on November 2, 2024 and sell it today you would earn a total of 217.00 from holding Honda Motor Co or generate 30.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 87.85% |
| Values | Daily Returns |
GreenPower Motor vs. Honda Motor Co
Performance |
| Timeline |
| GreenPower Motor |
| Honda Motor |
GreenPower and Honda Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GreenPower and Honda
The main advantage of trading using opposite GreenPower and Honda positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GreenPower 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.| GreenPower vs. Phoenix Motor Common | GreenPower vs. Envirotech Vehicles | GreenPower vs. Volcon Inc | GreenPower vs. Zapp Electric Vehicles |
| Honda vs. Bayerische Motoren Werke | Honda vs. Volkswagen AG VZO | Honda vs. Volkswagen AG | Honda vs. Bayerische Motoren Werke |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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