Correlation Between Honda and NWTN

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

Diversification Opportunities for Honda and NWTN

-0.75

Correlation Coefficient

Honda  NWTN

Pay attention - limited upside

The 3 months correlation between Honda and NWTN is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Honda Motor Co and NWTN Class B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NWTN Class B 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 NWTN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NWTN Class B has no effect on the direction of Honda i.e., Honda and NWTN go up and down completely randomly.

Pair Corralation between Honda and NWTN

Considering the 90-day investment horizon Honda Motor Co is expected to generate 0.19 times more return on investment than NWTN. However, Honda Motor Co is 5.18 times less risky than NWTN. It trades about 0.02 of its potential returns per unit of risk. NWTN Class B is currently generating about -0.02 per unit of risk. If you would invest  2,314  in Honda Motor Co on September 3, 2024 and sell it today you would earn a total of  292.00  from holding Honda Motor Co or generate 12.62% return on investment over 90 days.

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

Honda Motor Co  vs.  NWTN Class B

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 January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

NWTN Class B

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NWTN Class B are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, NWTN displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Honda and NWTN

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

The idea behind Honda Motor Co and NWTN Class B 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.