Correlation Between IShares MSCI and Honda
Can any of the company-specific risk be diversified away by investing in both IShares MSCI 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 IShares MSCI and Honda into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares MSCI USA and Honda Motor Co, you can compare the effects of market volatilities on IShares MSCI 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 IShares MSCI with a short position of Honda. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares MSCI and Honda.
Diversification Opportunities for IShares MSCI and Honda
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and Honda is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI USA and Honda Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honda Motor and IShares MSCI 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 iShares MSCI USA 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 IShares MSCI i.e., IShares MSCI and Honda go up and down completely randomly.
Pair Corralation between IShares MSCI and Honda
Given the investment horizon of 90 days IShares MSCI is expected to generate 1.53 times less return on investment than Honda. But when comparing it to its historical volatility, iShares MSCI USA is 1.1 times less risky than Honda. It trades about 0.03 of its potential returns per unit of risk. Honda Motor Co is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,544 in Honda Motor Co on January 26, 2024 and sell it today you would earn a total of 897.00 from holding Honda Motor Co or generate 35.26% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
iShares MSCI USA vs. Honda Motor Co
Performance |
Timeline |
iShares MSCI USA |
Honda Motor |
IShares MSCI and Honda Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with IShares MSCI and Honda
The main advantage of trading using opposite IShares MSCI and Honda positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares MSCI 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.IShares MSCI vs. OShares Quality Dividend | IShares MSCI vs. OShares Europe Quality | IShares MSCI vs. OShares Global Internet | IShares MSCI vs. ProShares SP MidCap |
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Check out your portfolio center.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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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