Correlation Between Hino Motors and Volkswagen

Can any of the company-specific risk be diversified away by investing in both Hino Motors and Volkswagen 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 Volkswagen 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 Volkswagen AG 110, you can compare the effects of market volatilities on Hino Motors and Volkswagen 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 Volkswagen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hino Motors and Volkswagen.

Diversification Opportunities for Hino Motors and Volkswagen

0.83

Correlation Coefficient

Hino Motors  Volkswagen

Very poor diversification

The 3 months correlation between Hino and Volkswagen is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Hino Motors Ltd and Volkswagen AG 110 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volkswagen AG 110 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 Volkswagen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volkswagen AG 110 has no effect on the direction of Hino Motors i.e., Hino Motors and Volkswagen go up and down completely randomly.

Pair Corralation between Hino Motors and Volkswagen

Assuming the 90 days horizon Hino Motors Ltd is expected to generate 0.63 times more return on investment than Volkswagen. However, Hino Motors Ltd is 1.6 times less risky than Volkswagen. It trades about 0.29 of its potential returns per unit of risk. Volkswagen AG 110 is currently generating about 0.14 per unit of risk. If you would invest  2,518  in Hino Motors Ltd on September 17, 2024 and sell it today you would earn a total of  109.00  from holding Hino Motors Ltd or generate 4.33% return on investment over 90 days.

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

Hino Motors Ltd  vs.  Volkswagen AG 110

Hino Motors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hino Motors Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Volkswagen AG 110

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volkswagen AG 110 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Hino Motors and Volkswagen

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

The idea behind Hino Motors Ltd and Volkswagen AG 110 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.