Correlation Between Honda and NWTN Warrant

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Can any of the company-specific risk be diversified away by investing in both Honda and NWTN Warrant 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 NWTN Warrant 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 NWTN Warrant, you can compare the effects of market volatilities on Honda and NWTN Warrant 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 NWTN Warrant. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honda and NWTN Warrant.

Diversification Opportunities for Honda and NWTN Warrant

-0.41
  Correlation Coefficient

Very good diversification

The 3 months correlation between Honda and NWTN is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Honda Motor Co and NWTN Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NWTN Warrant 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 NWTN Warrant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NWTN Warrant has no effect on the direction of Honda i.e., Honda and NWTN Warrant go up and down completely randomly.

Pair Corralation between Honda and NWTN Warrant

Considering the 90-day investment horizon Honda Motor Co is expected to under-perform the NWTN Warrant. But the stock apears to be less risky and, when comparing its historical volatility, Honda Motor Co is 10.81 times less risky than NWTN Warrant. The stock trades about -0.34 of its potential returns per unit of risk. The NWTN Warrant is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5.92  in NWTN Warrant on August 31, 2024 and sell it today you would lose (1.31) from holding NWTN Warrant or give up 22.13% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Honda Motor Co  vs.  NWTN Warrant

 Performance 
       Timeline  
Honda Motor 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Honda Motor Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
NWTN Warrant 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in NWTN Warrant are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, NWTN Warrant showed solid returns over the last few months and may actually be approaching a breakup point.

Honda and NWTN Warrant Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Honda and NWTN Warrant

The main advantage of trading using opposite Honda and NWTN Warrant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honda position performs unexpectedly, NWTN Warrant 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 NWTN Warrant will offset losses from the drop in NWTN Warrant's long position.
The idea behind Honda Motor Co and NWTN Warrant 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.
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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.

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