Correlation Between NYSE Composite and Honda
Can any of the company-specific risk be diversified away by investing in both NYSE Composite and Honda 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 NYSE Composite and Honda into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Honda Motor Co, you can compare the effects of market volatilities on NYSE Composite and Honda 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 NYSE Composite with a short position of Honda. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Honda.
Diversification Opportunities for NYSE Composite and Honda
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NYSE and Honda is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Honda Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honda Motor and NYSE Composite 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 NYSE Composite are associated (or correlated) with Honda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Honda Motor has no effect on the direction of NYSE Composite i.e., NYSE Composite and Honda go up and down completely randomly.
Pair Corralation between NYSE Composite and Honda
Assuming the 90 days trading horizon NYSE Composite is expected to generate 128.72 times less return on investment than Honda. But when comparing it to its historical volatility, NYSE Composite is 66.31 times less risky than Honda. It trades about 0.07 of its potential returns per unit of risk. Honda Motor Co is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 723.00 in Honda Motor Co on November 2, 2024 and sell it today you would earn a total of 217.00 from holding Honda Motor Co or generate 30.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 87.85% |
| Values | Daily Returns |
NYSE Composite vs. Honda Motor Co
Performance |
| Timeline |
NYSE Composite and Honda Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Honda Motor Co
Pair trading matchups for Honda
Pair Trading with NYSE Composite and Honda
The main advantage of trading using opposite NYSE Composite and Honda positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite position performs unexpectedly, Honda 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 Honda will offset losses from the drop in Honda's long position.| NYSE Composite vs. Palomar Holdings | NYSE Composite vs. The Peoples Insurance | NYSE Composite vs. Radian Group | NYSE Composite vs. Nascent Wine |
| Honda vs. Bayerische Motoren Werke | Honda vs. Volkswagen AG VZO | Honda vs. Volkswagen AG | Honda 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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