Correlation Between Honda and Hyzon Motors

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

Diversification Opportunities for Honda and Hyzon Motors

0.76

Correlation Coefficient

Honda  Hyzon Motors

Poor diversification

The 3 months correlation between Honda and Hyzon is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Honda Motor Co and Hyzon Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyzon Motors 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 Hyzon Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyzon Motors has no effect on the direction of Honda i.e., Honda and Hyzon Motors go up and down completely randomly.

Pair Corralation between Honda and Hyzon Motors

Considering the 90-day investment horizon Honda Motor Co is expected to under-perform the Hyzon Motors. But the stock apears to be less risky and, when comparing its historical volatility, Honda Motor Co is 3.92 times less risky than Hyzon Motors. The stock trades about -0.18 of its potential returns per unit of risk. The Hyzon Motors is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  235.00  in Hyzon Motors on September 14, 2024 and sell it today you would lose (47.00) from holding Hyzon Motors or give up 20.0% of portfolio value over 90 days.

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

Honda Motor Co  vs.  Hyzon Motors

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 weak performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Hyzon Motors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hyzon Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Honda and Hyzon Motors

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

The idea behind Honda Motor Co and Hyzon Motors 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.