Correlation Between Honda and Moderna

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

Diversification Opportunities for Honda and Moderna

0.89

Correlation Coefficient

Honda  Moderna

Very poor diversification

The 3 months correlation between Honda and Moderna is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Honda Motor Co and Moderna in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moderna 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 Moderna. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moderna has no effect on the direction of Honda i.e., Honda and Moderna go up and down completely randomly.

Pair Corralation between Honda and Moderna

Assuming the 90 days trading horizon Honda Motor Co is expected to generate 0.53 times more return on investment than Moderna. However, Honda Motor Co is 1.88 times less risky than Moderna. It trades about -0.16 of its potential returns per unit of risk. Moderna is currently generating about -0.15 per unit of risk. If you would invest  17,872  in Honda Motor Co on September 24, 2024 and sell it today you would lose (3,322) from holding Honda Motor Co or give up 18.59% of portfolio value over 90 days.

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

Honda Motor Co  vs.  Moderna

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.

Moderna

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Moderna has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak 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.

Pair Trading with Honda and Moderna

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

The idea behind Honda Motor Co and Moderna 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.