Correlation Between Honda and Niu Technologies

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

Diversification Opportunities for Honda and Niu Technologies

-0.78
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Honda and Niu is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Honda Motor Co and Niu Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Niu Technologies 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 Niu Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Niu Technologies has no effect on the direction of Honda i.e., Honda and Niu Technologies go up and down completely randomly.

Pair Corralation between Honda and Niu Technologies

Considering the 90-day investment horizon Honda Motor Co is expected to generate 0.36 times more return on investment than Niu Technologies. However, Honda Motor Co is 2.8 times less risky than Niu Technologies. It trades about 0.11 of its potential returns per unit of risk. Niu Technologies is currently generating about -0.09 per unit of risk. If you would invest  2,435  in Honda Motor Co on December 29, 2023 and sell it today you would earn a total of  1,276  from holding Honda Motor Co or generate 52.39% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Honda Motor Co  vs.  Niu Technologies

 Performance 
       Timeline  
Honda Motor 

Risk-Adjusted Performance

20 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Honda Motor Co are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, Honda exhibited solid returns over the last few months and may actually be approaching a breakup point.
Niu Technologies 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Niu Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's forward indicators remain comparatively stable which may send shares a bit higher in April 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Honda and Niu Technologies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Honda and Niu Technologies

The main advantage of trading using opposite Honda and Niu Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honda position performs unexpectedly, Niu Technologies 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 Niu Technologies will offset losses from the drop in Niu Technologies' long position.
The idea behind Honda Motor Co and Niu Technologies 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.
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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