Correlation Between Honda and Nissan
Can any of the company-specific risk be diversified away by investing in both Honda and Nissan 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 Nissan 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 Nissan Motor Co, you can compare the effects of market volatilities on Honda and Nissan 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 Nissan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honda and Nissan.
Diversification Opportunities for Honda and Nissan
Significant diversification
The 3 months correlation between Honda and Nissan is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Honda Motor Co and Nissan Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nissan Motor 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 Nissan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nissan Motor has no effect on the direction of Honda i.e., Honda and Nissan go up and down completely randomly.
Pair Corralation between Honda and Nissan
If you would invest 2,855 in Honda Motor Co on November 1, 2024 and sell it today you would earn a total of 12.00 from holding Honda Motor Co or generate 0.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 5.0% |
| Values | Daily Returns |
Honda Motor Co vs. Nissan Motor Co
Performance |
| Timeline |
| Honda Motor |
| Nissan Motor |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Honda and Nissan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Honda and Nissan
The main advantage of trading using opposite Honda and Nissan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honda position performs unexpectedly, Nissan 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 Nissan will offset losses from the drop in Nissan's long position.The idea behind Honda Motor Co and Nissan Motor Co 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.| Nissan vs. Honda Motor Co | Nissan vs. Toyota Motor | Nissan vs. Hyundai Motor Co | Nissan vs. Mazda Motor Corp |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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