Correlation Between Honda and Boston Scientific

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

Diversification Opportunities for Honda and Boston Scientific

-0.81

Correlation Coefficient

Honda  Boston Scientific

Pay attention - limited upside

The 3 months correlation between Honda and Boston is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Honda Motor Co and Boston Scientific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Scientific 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 Boston Scientific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Scientific has no effect on the direction of Honda i.e., Honda and Boston Scientific go up and down completely randomly.

Pair Corralation between Honda and Boston Scientific

Assuming the 90 days trading horizon Honda is expected to generate 3.75 times less return on investment than Boston Scientific. In addition to that, Honda is 1.64 times more volatile than Boston Scientific. It trades about 0.04 of its total potential returns per unit of risk. Boston Scientific is currently generating about 0.23 per unit of volatility. If you would invest  28,420  in Boston Scientific on September 25, 2024 and sell it today you would earn a total of  27,038  from holding Boston Scientific or generate 95.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	99.6%
Values	Daily Returns

Honda Motor Co  vs.  Boston Scientific

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.

Boston Scientific

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Scientific are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Boston Scientific sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Honda and Boston Scientific

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

The idea behind Honda Motor Co and Boston Scientific 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.