Correlation Between Honda and United Airlines
Can any of the company-specific risk be diversified away by investing in both Honda and United Airlines 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 United Airlines 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 United Airlines Holdings, you can compare the effects of market volatilities on Honda and United Airlines 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 United Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honda and United Airlines.
Diversification Opportunities for Honda and United Airlines
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Honda and United is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Honda Motor Co and United Airlines Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Airlines Holdings 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 United Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Airlines Holdings has no effect on the direction of Honda i.e., Honda and United Airlines go up and down completely randomly.
Pair Corralation between Honda and United Airlines
Assuming the 90 days trading horizon Honda Motor Co is expected to under-perform the United Airlines. But the stock apears to be less risky and, when comparing its historical volatility, Honda Motor Co is 1.19 times less risky than United Airlines. The stock trades about -0.25 of its potential returns per unit of risk. The United Airlines Holdings is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest 22,214 in United Airlines Holdings on August 27, 2024 and sell it today you would earn a total of 5,461 from holding United Airlines Holdings or generate 24.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Honda Motor Co vs. United Airlines Holdings
Performance |
| Timeline |
| Honda Motor |
| United Airlines Holdings |
Honda and United Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Honda and United Airlines
The main advantage of trading using opposite Honda and United Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honda position performs unexpectedly, United Airlines 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 United Airlines will offset losses from the drop in United Airlines' long position.| Honda vs. Marcopolo SA | Honda vs. Randon SA Implementos | Honda vs. Fras le SA | Honda vs. Indstrias Romi SA |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
Other Complementary Tools
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years |