Correlation Between Honda and Apple
Can any of the company-specific risk be diversified away by investing in both Honda and Apple 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 Apple 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 Apple Inc, you can compare the effects of market volatilities on Honda and Apple 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 Apple. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honda and Apple.
Diversification Opportunities for Honda and Apple
Excellent diversification
The 3 months correlation between Honda and Apple is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Honda Motor Co and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc 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 Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of Honda i.e., Honda and Apple go up and down completely randomly.
Pair Corralation between Honda and Apple
Assuming the 90 days trading horizon Honda is expected to generate 13.98 times less return on investment than Apple. In addition to that, Honda is 1.34 times more volatile than Apple Inc. It trades about 0.04 of its total potential returns per unit of risk. Apple Inc is currently generating about 0.68 per unit of volatility. If you would invest 6,555 in Apple Inc on September 18, 2024 and sell it today you would earn a total of 1,156 from holding Apple Inc or generate 17.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Honda Motor Co vs. Apple Inc
Performance |
| Timeline |
| Honda Motor |
| Apple Inc |
Honda and Apple Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Honda and Apple
The main advantage of trading using opposite Honda and Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honda position performs unexpectedly, Apple 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 Apple will offset losses from the drop in Apple's long position.| Honda vs. Tyson Foods | Honda vs. Apartment Investment and | Honda vs. Align Technology | Honda vs. The Home Depot |
| Apple vs. HDFC Bank Limited | Apple vs. Lloyds Banking Group | Apple vs. Sumitomo Mitsui Financial | Apple vs. GP Investments |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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