Correlation Between Honda and Electrameccanica

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

Diversification Opportunities for Honda and Electrameccanica

-0.74

Correlation Coefficient

Honda  Electrameccanica

Pay attention - limited upside

The 3 months correlation between Honda and Electrameccanica is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Honda Motor Co and Electrameccanica Vehicles Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electrameccanica Veh 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 Electrameccanica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electrameccanica Veh has no effect on the direction of Honda i.e., Honda and Electrameccanica go up and down completely randomly.

Pair Corralation between Honda and Electrameccanica

If you would invest  21.00  in Electrameccanica Vehicles Corp on January 24, 2024 and sell it today you would earn a total of  0.00  from holding Electrameccanica Vehicles Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	10.0%
Values	Daily Returns

Honda Motor Co  vs.  Electrameccanica Vehicles Corp

Honda Motor

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Honda Motor Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating primary indicators, Honda may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Electrameccanica Veh

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Electrameccanica Vehicles Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Honda and Electrameccanica

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

The idea behind Honda Motor Co and Electrameccanica Vehicles Corp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.