Correlation Between Marcopolo and Honda

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

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

Diversification Opportunities for Marcopolo and Honda

-0.72

Correlation Coefficient

Marcopolo  Honda

Pay attention - limited upside

The 3 months correlation between Marcopolo and Honda is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Marcopolo SA and Honda Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honda Motor and Marcopolo 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 Marcopolo SA 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 Marcopolo i.e., Marcopolo and Honda go up and down completely randomly.

Pair Corralation between Marcopolo and Honda

Assuming the 90 days trading horizon Marcopolo SA is expected to generate 1.22 times more return on investment than Honda. However, Marcopolo is 1.22 times more volatile than Honda Motor Co. It trades about 0.08 of its potential returns per unit of risk. Honda Motor Co is currently generating about -0.07 per unit of risk. If you would invest  601.00  in Marcopolo SA on September 13, 2024 and sell it today you would earn a total of  64.00  from holding Marcopolo SA or generate 10.65% return on investment over 90 days.

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

Marcopolo SA  vs.  Honda Motor Co

Marcopolo SA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Marcopolo SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Marcopolo may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 latest weak 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.

Pair Trading with Marcopolo and Honda

The main advantage of trading using opposite Marcopolo and Honda positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marcopolo 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 Marcopolo SA 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.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.