Correlation Between SES AI and Honda
Can any of the company-specific risk be diversified away by investing in both SES AI 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 SES AI and Honda into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SES AI Corp and Honda Motor Co, you can compare the effects of market volatilities on SES AI 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 SES AI with a short position of Honda. Check out your portfolio center. Please also check ongoing floating volatility patterns of SES AI and Honda.
Diversification Opportunities for SES AI and Honda
Poor diversification
The 3 months correlation between SES and Honda is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding SES AI Corp and Honda Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honda Motor and SES AI 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 SES AI Corp 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 SES AI i.e., SES AI and Honda go up and down completely randomly.
Pair Corralation between SES AI and Honda
Considering the 90-day investment horizon SES AI Corp is expected to under-perform the Honda. In addition to that, SES AI is 3.6 times more volatile than Honda Motor Co. It trades about -0.24 of its total potential returns per unit of risk. Honda Motor Co is currently generating about -0.19 per unit of volatility. If you would invest 3,236 in Honda Motor Co on August 31, 2024 and sell it today you would lose (673.00) from holding Honda Motor Co or give up 20.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SES AI Corp vs. Honda Motor Co
Performance |
| Timeline |
| SES AI Corp |
| Honda Motor |
SES AI and Honda Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SES AI and Honda
The main advantage of trading using opposite SES AI and Honda positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SES AI 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.| SES AI vs. Cooper Stnd | SES AI vs. Motorcar Parts of | SES AI vs. American Axle Manufacturing | SES AI vs. Stoneridge |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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