Correlation Between Renault SA and Honda
Can any of the company-specific risk be diversified away by investing in both Renault SA 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 Renault SA and Honda into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Renault SA and Honda Motor Co, you can compare the effects of market volatilities on Renault SA 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 Renault SA with a short position of Honda. Check out your portfolio center. Please also check ongoing floating volatility patterns of Renault SA and Honda.
Diversification Opportunities for Renault SA and Honda
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Renault and Honda is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Renault SA and Honda Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honda Motor and Renault SA 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 Renault SA 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 Renault SA i.e., Renault SA and Honda go up and down completely randomly.
Pair Corralation between Renault SA and Honda
Assuming the 90 days horizon Renault SA is expected to generate 0.59 times more return on investment than Honda. However, Renault SA is 1.7 times less risky than Honda. It trades about -0.43 of its potential returns per unit of risk. Honda Motor Co is currently generating about -0.32 per unit of risk. If you would invest 937.00 in Renault SA on August 28, 2024 and sell it today you would lose (104.00) from holding Renault SA or give up 11.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Renault SA vs. Honda Motor Co
Performance |
| Timeline |
| Renault SA |
| Honda Motor |
Renault SA and Honda Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Renault SA and Honda
The main advantage of trading using opposite Renault SA and Honda positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Renault SA 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.| Renault SA vs. Isuzu Motors | Renault SA vs. Toyota Motor Corp | Renault SA vs. Porsche Automobile Holding |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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