Correlation Between Fiat Chrysler and Honda

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

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

Diversification Opportunities for Fiat Chrysler and Honda

0.0

Correlation Coefficient

Fiat Chrysler  Honda

Pay attention - limited upside

The 3 months correlation between Fiat and Honda is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Fiat Chrysler Automobiles and Honda Motor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Honda Motor and Fiat Chrysler 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 Fiat Chrysler Automobiles 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 Fiat Chrysler i.e., Fiat Chrysler and Honda go up and down completely randomly.

Pair Corralation between Fiat Chrysler and Honda

If you would invest  2,444  in Honda Motor Co on January 30, 2024 and sell it today you would earn a total of  959.00  from holding Honda Motor Co or generate 39.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Fiat Chrysler Automobiles  vs.  Honda Motor Co

Fiat Chrysler Automobiles

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fiat Chrysler Automobiles has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Fiat Chrysler is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Honda Motor

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Honda Motor Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Honda is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Fiat Chrysler and Honda

The main advantage of trading using opposite Fiat Chrysler and Honda positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fiat Chrysler 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 Fiat Chrysler Automobiles 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.