Correlation Between Honda and Canoo

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

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

Diversification Opportunities for Honda and Canoo

-0.47

Correlation Coefficient

Honda  Canoo

Very good diversification

The 3 months correlation between Honda and Canoo is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Honda Motor Co and Canoo Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canoo Inc and Honda 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 Motor Co are associated (or correlated) with Canoo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canoo Inc has no effect on the direction of Honda i.e., Honda and Canoo go up and down completely randomly.

Pair Corralation between Honda and Canoo

Considering the 90-day investment horizon Honda Motor Co is expected to generate 0.07 times more return on investment than Canoo. However, Honda Motor Co is 13.53 times less risky than Canoo. It trades about 0.05 of its potential returns per unit of risk. Canoo Inc is currently generating about -0.21 per unit of risk. If you would invest  2,876  in Honda Motor Co on December 27, 2024 and sell it today you would earn a total of  137.00  from holding Honda Motor Co or generate 4.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	40.0%
Values	Daily Returns

Honda Motor Co  vs.  Canoo Inc

Honda Motor

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Honda Motor Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Honda is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Canoo Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Canoo Inc 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 stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Honda and Canoo

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

The idea behind Honda Motor Co and Canoo Inc 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.