Correlation Between Honda and Vicinity
Can any of the company-specific risk be diversified away by investing in both Honda and Vicinity 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 Vicinity 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 Vicinity Motor Corp, you can compare the effects of market volatilities on Honda and Vicinity 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 Vicinity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honda and Vicinity.
Diversification Opportunities for Honda and Vicinity
Very poor diversification
The 3 months correlation between Honda and Vicinity is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Honda Motor Co and Vicinity Motor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vicinity Motor Corp 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 Vicinity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vicinity Motor Corp has no effect on the direction of Honda i.e., Honda and Vicinity go up and down completely randomly.
Pair Corralation between Honda and Vicinity
Considering the 90-day investment horizon Honda Motor Co is expected to generate 0.08 times more return on investment than Vicinity. However, Honda Motor Co is 12.28 times less risky than Vicinity. It trades about -0.1 of its potential returns per unit of risk. Vicinity Motor Corp is currently generating about -0.1 per unit of risk. If you would invest 3,323 in Honda Motor Co on August 24, 2024 and sell it today you would lose (700.00) from holding Honda Motor Co or give up 21.07% 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. Vicinity Motor Corp
Performance |
| Timeline |
| Honda Motor |
| Vicinity Motor Corp |
Honda and Vicinity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Honda and Vicinity
The main advantage of trading using opposite Honda and Vicinity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honda position performs unexpectedly, Vicinity 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 Vicinity will offset losses from the drop in Vicinity's long position.The idea behind Honda Motor Co and Vicinity Motor Corp 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.| Vicinity vs. Blue Bird Corp | Vicinity vs. AYRO Inc | Vicinity vs. BAIC Motor | Vicinity vs. Zapp Electric Vehicles |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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