Correlation Between MAHLE Metal and Honda

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

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

Diversification Opportunities for MAHLE Metal and Honda

0.82

Correlation Coefficient

MAHLE Metal  Honda

Very poor diversification

The 3 months correlation between MAHLE and Honda is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding MAHLE Metal Leve and Honda Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honda Motor and MAHLE Metal 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 MAHLE Metal Leve are associated (or correlated) with Honda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Honda Motor has no effect on the direction of MAHLE Metal i.e., MAHLE Metal and Honda go up and down completely randomly.

Pair Corralation between MAHLE Metal and Honda

Assuming the 90 days trading horizon MAHLE Metal Leve is expected to generate 1.65 times more return on investment than Honda. However, MAHLE Metal is 1.65 times more volatile than Honda Motor Co. It trades about 0.04 of its potential returns per unit of risk. Honda Motor Co is currently generating about 0.03 per unit of risk. If you would invest  1,928  in MAHLE Metal Leve on September 23, 2024 and sell it today you would earn a total of  805.00  from holding MAHLE Metal Leve or generate 41.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.8%
Values	Daily Returns

MAHLE Metal Leve  vs.  Honda Motor Co

MAHLE Metal Leve

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MAHLE Metal Leve has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat 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 MAHLE Metal and Honda

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

The idea behind MAHLE Metal Leve and Honda Motor Co 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.