Correlation Between Isuzu Motors and Honda

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

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

Diversification Opportunities for Isuzu Motors and Honda

0.07

Correlation Coefficient

Isuzu Motors  Honda

Significant diversification

The 3 months correlation between Isuzu and Honda is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Isuzu Motors and Honda Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honda Motor and Isuzu Motors 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 Isuzu Motors 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 Isuzu Motors i.e., Isuzu Motors and Honda go up and down completely randomly.

Pair Corralation between Isuzu Motors and Honda

Assuming the 90 days horizon Isuzu Motors is expected to generate 0.58 times more return on investment than Honda. However, Isuzu Motors is 1.71 times less risky than Honda. It trades about 0.36 of its potential returns per unit of risk. Honda Motor Co is currently generating about 0.0 per unit of risk. If you would invest  1,247  in Isuzu Motors on September 16, 2024 and sell it today you would earn a total of  142.00  from holding Isuzu Motors or generate 11.39% return on investment over 90 days.

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

Isuzu Motors  vs.  Honda Motor Co

Isuzu Motors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Isuzu Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Isuzu Motors is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Isuzu Motors and Honda

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

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.