Correlation Between Hino Motors and AGCO

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

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

Diversification Opportunities for Hino Motors and AGCO

0.16

Correlation Coefficient

Hino Motors  AGCO

Average diversification

The 3 months correlation between Hino and AGCO is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Hino Motors Ltd and AGCO Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGCO and Hino Motors 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 Hino Motors Ltd are associated (or correlated) with AGCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGCO has no effect on the direction of Hino Motors i.e., Hino Motors and AGCO go up and down completely randomly.

Pair Corralation between Hino Motors and AGCO

Assuming the 90 days horizon Hino Motors Ltd is expected to generate 1.21 times more return on investment than AGCO. However, Hino Motors is 1.21 times more volatile than AGCO Corporation. It trades about 0.02 of its potential returns per unit of risk. AGCO Corporation is currently generating about 0.02 per unit of risk. If you would invest  3,203  in Hino Motors Ltd on December 26, 2024 and sell it today you would earn a total of  31.00  from holding Hino Motors Ltd or generate 0.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Hino Motors Ltd  vs.  AGCO Corp.

Hino Motors

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hino Motors Ltd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Hino Motors is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

AGCO

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in AGCO Corporation are ranked lower than 1 (%) 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.

Pair Trading with Hino Motors and AGCO

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

The idea behind Hino Motors Ltd and AGCO Corporation 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.