Correlation Between Honda and Yamaha
Can any of the company-specific risk be diversified away by investing in both Honda and Yamaha 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 Yamaha 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 Yamaha Motor Co, you can compare the effects of market volatilities on Honda and Yamaha 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 Yamaha. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honda and Yamaha.
Diversification Opportunities for Honda and Yamaha
Very weak diversification
The 3 months correlation between Honda and Yamaha is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Honda Motor Co and Yamaha Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yamaha 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 Yamaha. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yamaha Motor has no effect on the direction of Honda i.e., Honda and Yamaha go up and down completely randomly.
Pair Corralation between Honda and Yamaha
Assuming the 90 days horizon Honda Motor Co is expected to under-perform the Yamaha. In addition to that, Honda is 1.67 times more volatile than Yamaha Motor Co. It trades about -0.03 of its total potential returns per unit of risk. Yamaha Motor Co is currently generating about -0.03 per unit of volatility. If you would invest 927.00 in Yamaha Motor Co on August 28, 2024 and sell it today you would lose (100.00) from holding Yamaha Motor Co or give up 10.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.41% |
| Values | Daily Returns |
Honda Motor Co vs. Yamaha Motor Co
Performance |
| Timeline |
| Honda Motor |
| Yamaha Motor |
Honda and Yamaha Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Honda and Yamaha
The main advantage of trading using opposite Honda and Yamaha positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honda position performs unexpectedly, Yamaha 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 Yamaha will offset losses from the drop in Yamaha's long position.| Honda vs. Bayerische Motoren Werke | Honda vs. Volkswagen AG VZO | Honda vs. Volkswagen AG | Honda vs. Bayerische Motoren Werke |
| Yamaha vs. Isuzu Motors | Yamaha vs. Renault SA | Yamaha vs. Mazda Motor Corp | Yamaha vs. Bayerische Motoren Werke |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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