Correlation Between Linamar and Honda

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

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

Diversification Opportunities for Linamar and Honda

-0.12

Correlation Coefficient

Linamar  Honda

Good diversification

The 3 months correlation between Linamar and Honda is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Linamar and Honda Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honda Motor and Linamar 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 Linamar 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 Linamar i.e., Linamar and Honda go up and down completely randomly.

Pair Corralation between Linamar and Honda

Assuming the 90 days horizon Linamar is expected to under-perform the Honda. In addition to that, Linamar is 1.04 times more volatile than Honda Motor Co. It trades about -0.06 of its total potential returns per unit of risk. Honda Motor Co is currently generating about -0.03 per unit of volatility. If you would invest  2,850  in Honda Motor Co on December 28, 2024 and sell it today you would lose (124.00) from holding Honda Motor Co or give up 4.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Linamar  vs.  Honda Motor Co

Linamar

Risk-Adjusted Performance

Very Weak

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

Honda Motor

Risk-Adjusted Performance

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 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.

Pair Trading with Linamar and Honda

The main advantage of trading using opposite Linamar and Honda positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Linamar 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 Linamar 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 CEOs Directory module to screen CEOs from public companies around the world.