26.89 -0.36 (-1.32%) Sell

HMC is a falling knife, continues to bleed every investor trying to catch it

13 min read

HONDA MOTOR CO LTD (Foreign) was among the worst performers today. It delivered -1.32% to close at 26.89. It's recent 5 day performance has been -1.55%, -3.62%, +1.95%, +1.26% and -0.78%.

[Themes containing HMC]

HMC showed a bearish trend over the last 3 months. During this period HMC delivered -5.88% and saw a maximum drawdown of -15.65%. It has been unusually choppy during this period. Long term investors are better off avoiding investing in HMC till volatility reduces and a clear trend emerges.


HMC has been outperforming the SP500 index in recent time. It showed significant underperformance (compared to the SP500 index) from 13 Jan, 2016 to 12 Sep, 2018. Over the last 2 years 11 months and 3 days, HMC underperformed the SP500 index on 50% days. Which indicates that on days HMC underperforms the SP500 index, it's performance is marginally worse than on the days it outperforms the SP500 index.

During the last three months HMC was mostly loss making and delivered on average -0.08% per day. It's best return during this period (of +4.16%) was on Tuesday, 30 Oct, 2018. While it's worst loss in the same period (of -4.19%) was on Wednesday, 24 Oct, 2018. The longest stort-term trend during this period was 7 profitable days, which started on 13 Sep, 2018 and went on till 21 Sep, 2018. This bullish trend returned +9.27% to investors.

The last 12 months saw HMC's investors making profits in 5 months and incurring losses in 7 months. HMC was less consistent in delivering monthly returs than SP500 index. HMC was also a more risky investment than SP500 index as it's worst month in the last year, Jun 2018, returned -7.84% compared to -7.28% returned by SP500 index in Oct 2018. HMC had a longer winning streak of losing months than SP500 index. It went down in 3 straight months (from Oct 2018 to Dec 2018) during which period it delivered -12.01%. It is interesting to note that both HMC and SP500 index significantly outperform during months when quarterly/annual results are announced.

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HMC is currently seeing overall increase in volatility. In comparison, the SP500 index is seeing increase in volatility. During the last three months, there was a significant surge in HMC's volatility from 10 Sep, 2018 to 30 Oct, 2018. While there was a significant surge in the SP500 index's volatility from 10 Sep, 2018 to 29 Oct, 2018.

Advanced/professional short-term investors should note that HMC has negative skewness in it's return distribution. This indicates that investors may need to stay invested through long periods of drawdown before expecting a recovery.

HMC has more chance of extreme outcomes than the SP500 index. Therefore, HMC must receive a lower allocation than SP500 in your portfolio. SP500 index usually has shorter drawdown period than HMC.

Based on your interest in HMC you may find it interesting to know that EPIX and NVCN are highly volatile and therefore risky. Investors should consider limiting their exposure to these instruments (because of their volatile nature).

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