Correlation Between Tesla and Honda
Can any of the company-specific risk be diversified away by investing in both Tesla 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 Tesla and Honda into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesla Inc and Honda Motor Co, you can compare the effects of market volatilities on Tesla 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 Tesla with a short position of Honda. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesla and Honda.
Diversification Opportunities for Tesla and Honda
Pay attention - limited upside
The 3 months correlation between Tesla and Honda is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc and Honda Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honda Motor and Tesla 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 Tesla Inc 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 Tesla i.e., Tesla and Honda go up and down completely randomly.
Pair Corralation between Tesla and Honda
Assuming the 90 days trading horizon Tesla Inc is expected to generate 1.95 times more return on investment than Honda. However, Tesla is 1.95 times more volatile than Honda Motor Co. It trades about 0.63 of its potential returns per unit of risk. Honda Motor Co is currently generating about 0.04 per unit of risk. If you would invest 6,106 in Tesla Inc on September 18, 2024 and sell it today you would earn a total of 3,014 from holding Tesla Inc or generate 49.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tesla Inc vs. Honda Motor Co
Performance |
| Timeline |
| Tesla Inc |
| Honda Motor |
Tesla and Honda Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tesla and Honda
The main advantage of trading using opposite Tesla and Honda positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla 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.| Tesla vs. Spotify Technology SA | Tesla vs. Zoom Video Communications | Tesla vs. United States Steel | Tesla vs. Extra Space Storage |
| Honda vs. Tyson Foods | Honda vs. Apartment Investment and | Honda vs. Align Technology | Honda vs. The Home Depot |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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