Correlation Between Akamai Technologies, and Honda

Can any of the company-specific risk be diversified away by investing in both Akamai Technologies, 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 Akamai Technologies, and Honda into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Akamai Technologies, and Honda Motor Co, you can compare the effects of market volatilities on Akamai Technologies, 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 Akamai Technologies, with a short position of Honda. Check out your portfolio center. Please also check ongoing floating volatility patterns of Akamai Technologies, and Honda.

Diversification Opportunities for Akamai Technologies, and Honda

0.38

Correlation Coefficient

Akamai Technologies,  Honda

Weak diversification

The 3 months correlation between Akamai and Honda is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Akamai Technologies, and Honda Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honda Motor and Akamai Technologies, 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 Akamai Technologies, 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 Akamai Technologies, i.e., Akamai Technologies, and Honda go up and down completely randomly.

Pair Corralation between Akamai Technologies, and Honda

Assuming the 90 days trading horizon Akamai Technologies, is expected to generate 1.78 times less return on investment than Honda. But when comparing it to its historical volatility, Akamai Technologies, is 1.21 times less risky than Honda. It trades about 0.04 of its potential returns per unit of risk. Honda Motor Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  11,498  in Honda Motor Co on October 10, 2024 and sell it today you would earn a total of  7,096  from holding Honda Motor Co or generate 61.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Akamai Technologies,  vs.  Honda Motor Co

Akamai Technologies,

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Akamai Technologies, are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward-looking signals, Akamai Technologies, is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Honda Motor

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Honda Motor Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Honda may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Akamai Technologies, and Honda

The main advantage of trading using opposite Akamai Technologies, and Honda positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Akamai Technologies, 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.

The idea behind Akamai Technologies, and Honda Motor Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.