Correlation Between Honda Atlas and Agritech

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

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

Diversification Opportunities for Honda Atlas and Agritech

-0.55

Correlation Coefficient

Honda Atlas  Agritech

Excellent diversification

The 3 months correlation between Honda and Agritech is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Honda Atlas Cars and Agritech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agritech and Honda Atlas 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 Honda Atlas Cars are associated (or correlated) with Agritech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agritech has no effect on the direction of Honda Atlas i.e., Honda Atlas and Agritech go up and down completely randomly.

Pair Corralation between Honda Atlas and Agritech

Assuming the 90 days trading horizon Honda Atlas Cars is expected to under-perform the Agritech. But the stock apears to be less risky and, when comparing its historical volatility, Honda Atlas Cars is 2.8 times less risky than Agritech. The stock trades about -0.02 of its potential returns per unit of risk. The Agritech is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  3,800  in Agritech on December 24, 2024 and sell it today you would earn a total of  3,559  from holding Agritech or generate 93.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Honda Atlas Cars  vs.  Agritech

Honda Atlas Cars

Risk-Adjusted Performance

Very Weak

Over the last 90 days Honda Atlas Cars has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Honda Atlas is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Agritech

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Agritech are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Agritech reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Honda Atlas and Agritech

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

The idea behind Honda Atlas Cars and Agritech 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.