Correlation Between Honda and Ford

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

Diversification Opportunities for Honda and Ford

0.31

Correlation Coefficient

Honda  Ford

Weak diversification

The 3 months correlation between Honda and Ford is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Honda Motor Co and Ford Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor 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 Ford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Motor has no effect on the direction of Honda i.e., Honda and Ford go up and down completely randomly.

Pair Corralation between Honda and Ford

Considering the 90-day investment horizon Honda is expected to generate 1.46 times less return on investment than Ford. In addition to that, Honda is 1.42 times more volatile than Ford Motor. It trades about 0.04 of its total potential returns per unit of risk. Ford Motor is currently generating about 0.09 per unit of volatility. If you would invest  1,013  in Ford Motor on May 7, 2025 and sell it today you would earn a total of  82.00  from holding Ford Motor or generate 8.09% return on investment over 90 days.

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

Honda Motor Co  vs.  Ford Motor

Honda Motor

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Honda Motor Co are ranked lower than 3 (%) 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.

Ford Motor

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Ford may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Honda and Ford

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

The idea behind Honda Motor Co and Ford Motor 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.