Correlation Between Honda and ECD Automotive
Can any of the company-specific risk be diversified away by investing in both Honda and ECD Automotive 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 Honda and ECD Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Honda Motor Co and ECD Automotive Design, you can compare the effects of market volatilities on Honda and ECD Automotive 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 Honda with a short position of ECD Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honda and ECD Automotive.
Diversification Opportunities for Honda and ECD Automotive
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Honda and ECD is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Honda Motor Co and ECD Automotive Design in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECD Automotive Design and Honda 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 Honda Motor Co are associated (or correlated) with ECD Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECD Automotive Design has no effect on the direction of Honda i.e., Honda and ECD Automotive go up and down completely randomly.
Pair Corralation between Honda and ECD Automotive
Considering the 90-day investment horizon Honda Motor Co is expected to generate 0.25 times more return on investment than ECD Automotive. However, Honda Motor Co is 3.99 times less risky than ECD Automotive. It trades about 0.03 of its potential returns per unit of risk. ECD Automotive Design is currently generating about -0.04 per unit of risk. If you would invest 2,203 in Honda Motor Co on September 12, 2024 and sell it today you would earn a total of 394.00 from holding Honda Motor Co or generate 17.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Honda Motor Co vs. ECD Automotive Design
Performance |
| Timeline |
| Honda Motor |
| ECD Automotive Design |
Honda and ECD Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Honda and ECD Automotive
The main advantage of trading using opposite Honda and ECD Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honda position performs unexpectedly, ECD Automotive 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 ECD Automotive will offset losses from the drop in ECD Automotive's long position.The idea behind Honda Motor Co and ECD Automotive Design 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.| ECD Automotive vs. NETGEAR | ECD Automotive vs. Asure Software | ECD Automotive vs. Analog Devices | ECD Automotive vs. Bridgford Foods |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
Other Complementary Tools
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon |