Correlation Between Honda and Jardine Cycle

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

Diversification Opportunities for Honda and Jardine Cycle

0.35

Correlation Coefficient

Honda  Jardine Cycle

Weak diversification

The 3 months correlation between Honda and Jardine is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Honda Motor Co and Jardine Cycle Carriage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jardine Cycle Carriage 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 Jardine Cycle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jardine Cycle Carriage has no effect on the direction of Honda i.e., Honda and Jardine Cycle go up and down completely randomly.

Pair Corralation between Honda and Jardine Cycle

Considering the 90-day investment horizon Honda Motor Co is expected to under-perform the Jardine Cycle. In addition to that, Honda is 1.31 times more volatile than Jardine Cycle Carriage. It trades about -0.18 of its total potential returns per unit of risk. Jardine Cycle Carriage is currently generating about -0.1 per unit of volatility. If you would invest  2,150  in Jardine Cycle Carriage on September 1, 2024 and sell it today you would lose (200.00) from holding Jardine Cycle Carriage or give up 9.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Honda Motor Co  vs.  Jardine Cycle Carriage

Honda Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Honda Motor Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Jardine Cycle Carriage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jardine Cycle Carriage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Honda and Jardine Cycle

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

The idea behind Honda Motor Co and Jardine Cycle Carriage 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.

Check out your portfolio center.

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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.