Correlation Between Honda and Companhia
Can any of the company-specific risk be diversified away by investing in both Honda and Companhia 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 Companhia 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 Companhia de Gs, you can compare the effects of market volatilities on Honda and Companhia 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 Companhia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honda and Companhia.
Diversification Opportunities for Honda and Companhia
Very good diversification
The 3 months correlation between Honda and Companhia is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Honda Motor Co and Companhia de Gs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia de Gs 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 Companhia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia de Gs has no effect on the direction of Honda i.e., Honda and Companhia go up and down completely randomly.
Pair Corralation between Honda and Companhia
Assuming the 90 days trading horizon Honda Motor Co is expected to under-perform the Companhia. But the stock apears to be less risky and, when comparing its historical volatility, Honda Motor Co is 2.79 times less risky than Companhia. The stock trades about -0.02 of its potential returns per unit of risk. The Companhia de Gs is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 8,006 in Companhia de Gs on August 27, 2024 and sell it today you would earn a total of 3,998 from holding Companhia de Gs or generate 49.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 93.12% |
| Values | Daily Returns |
Honda Motor Co vs. Companhia de Gs
Performance |
| Timeline |
| Honda Motor |
| Companhia de Gs |
Honda and Companhia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Honda and Companhia
The main advantage of trading using opposite Honda and Companhia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honda position performs unexpectedly, Companhia 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 Companhia will offset losses from the drop in Companhia's long position.| Honda vs. Marcopolo SA | Honda vs. Randon SA Implementos | Honda vs. Fras le SA | Honda vs. Indstrias Romi SA |
| Companhia vs. Companhia de Gs | Companhia vs. Braskem SA | Companhia vs. Companhia Paranaense de | Companhia vs. Companhia Energtica de |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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