Correlation Between AGCO and Hino Motors

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

By analyzing existing cross correlation between AGCO Corporation and Hino Motors Ltd, you can compare the effects of market volatilities on AGCO and Hino Motors 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 AGCO with a short position of Hino Motors. Check out your portfolio center. Please also check ongoing floating volatility patterns of AGCO and Hino Motors.

Diversification Opportunities for AGCO and Hino Motors

0.14

Correlation Coefficient

AGCO  Hino Motors

Average diversification

The 3 months correlation between AGCO and Hino is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding AGCO Corp. and Hino Motors Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hino Motors and AGCO 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 AGCO Corporation are associated (or correlated) with Hino Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hino Motors has no effect on the direction of AGCO i.e., AGCO and Hino Motors go up and down completely randomly.

Pair Corralation between AGCO and Hino Motors

Given the investment horizon of 90 days AGCO Corporation is expected to generate 2.34 times more return on investment than Hino Motors. However, AGCO is 2.34 times more volatile than Hino Motors Ltd. It trades about 0.31 of its potential returns per unit of risk. Hino Motors Ltd is currently generating about 0.23 per unit of risk. If you would invest  9,055  in AGCO Corporation on October 20, 2024 and sell it today you would earn a total of  1,114  from holding AGCO Corporation or generate 12.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

AGCO Corp.  vs.  Hino Motors Ltd

AGCO

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AGCO Corporation are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, AGCO is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Hino Motors

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hino Motors Ltd are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Hino Motors showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AGCO and Hino Motors

The main advantage of trading using opposite AGCO and Hino Motors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AGCO position performs unexpectedly, Hino Motors 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 Hino Motors will offset losses from the drop in Hino Motors' long position.

The idea behind AGCO Corporation and Hino Motors Ltd 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.

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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.