Correlation Between Honda and Suzuki
Can any of the company-specific risk be diversified away by investing in both Honda and Suzuki 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 Suzuki 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 Suzuki Motor Corp, you can compare the effects of market volatilities on Honda and Suzuki 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 Suzuki. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honda and Suzuki.
Diversification Opportunities for Honda and Suzuki
Significant diversification
The 3 months correlation between Honda and Suzuki is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Honda Motor Co and Suzuki Motor Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzuki 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 Suzuki. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzuki Motor Corp has no effect on the direction of Honda i.e., Honda and Suzuki go up and down completely randomly.
Pair Corralation between Honda and Suzuki
Assuming the 90 days horizon Honda Motor Co is expected to under-perform the Suzuki. In addition to that, Honda is 2.0 times more volatile than Suzuki Motor Corp. It trades about -0.14 of its total potential returns per unit of risk. Suzuki Motor Corp is currently generating about 0.19 per unit of volatility. If you would invest 3,920 in Suzuki Motor Corp on August 25, 2024 and sell it today you would earn a total of 347.00 from holding Suzuki Motor Corp or generate 8.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Honda Motor Co vs. Suzuki Motor Corp
Performance |
| Timeline |
| Honda Motor |
| Suzuki Motor Corp |
Honda and Suzuki Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Honda and Suzuki
The main advantage of trading using opposite Honda and Suzuki positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honda position performs unexpectedly, Suzuki 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 Suzuki will offset losses from the drop in Suzuki's long position.| Honda vs. Bayerische Motoren Werke | Honda vs. Volkswagen AG VZO | Honda vs. Volkswagen AG | Honda vs. Bayerische Motoren Werke |
| Suzuki vs. Isuzu Motors | Suzuki vs. Honda Motor Co | Suzuki vs. Porsche Automobil Holding | Suzuki 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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