Correlation Between Honda and NFI
Can any of the company-specific risk be diversified away by investing in both Honda and NFI 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 NFI 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 NFI Group, you can compare the effects of market volatilities on Honda and NFI 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 NFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honda and NFI.
Diversification Opportunities for Honda and NFI
Very poor diversification
The 3 months correlation between Honda and NFI is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Honda Motor Co and NFI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NFI Group 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 NFI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NFI Group has no effect on the direction of Honda i.e., Honda and NFI go up and down completely randomly.
Pair Corralation between Honda and NFI
Considering the 90-day investment horizon Honda Motor Co is expected to generate 1.17 times more return on investment than NFI. However, Honda is 1.17 times more volatile than NFI Group. It trades about -0.25 of its potential returns per unit of risk. NFI Group is currently generating about -0.31 per unit of risk. If you would invest 3,041 in Honda Motor Co on August 24, 2024 and sell it today you would lose (374.50) from holding Honda Motor Co or give up 12.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Honda Motor Co vs. NFI Group
Performance |
| Timeline |
| Honda Motor |
| NFI Group |
Honda and NFI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Honda and NFI
The main advantage of trading using opposite Honda and NFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honda position performs unexpectedly, NFI 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 NFI will offset losses from the drop in NFI's long position.The idea behind Honda Motor Co and NFI Group 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.| NFI vs. Zapp Electric Vehicles | NFI vs. Guangzhou Automobile Group | NFI vs. Exor NV | NFI vs. Aston Martin Lagonda |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
Other Complementary Tools
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio |