Correlation Between Sumitomo Mitsui and Hitachi Construction
Can any of the company-specific risk be diversified away by investing in both Sumitomo Mitsui and Hitachi Construction 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 Sumitomo Mitsui and Hitachi Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sumitomo Mitsui Construction and Hitachi Construction Machinery, you can compare the effects of market volatilities on Sumitomo Mitsui and Hitachi Construction 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 Sumitomo Mitsui with a short position of Hitachi Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Mitsui and Hitachi Construction.
Diversification Opportunities for Sumitomo Mitsui and Hitachi Construction
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sumitomo and Hitachi is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Mitsui Construction and Hitachi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Construction and Sumitomo Mitsui 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 Sumitomo Mitsui Construction are associated (or correlated) with Hitachi Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hitachi Construction has no effect on the direction of Sumitomo Mitsui i.e., Sumitomo Mitsui and Hitachi Construction go up and down completely randomly.
Pair Corralation between Sumitomo Mitsui and Hitachi Construction
Assuming the 90 days horizon Sumitomo Mitsui Construction is expected to under-perform the Hitachi Construction. But the stock apears to be less risky and, when comparing its historical volatility, Sumitomo Mitsui Construction is 1.33 times less risky than Hitachi Construction. The stock trades about -0.01 of its potential returns per unit of risk. The Hitachi Construction Machinery is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 2,080 in Hitachi Construction Machinery on September 7, 2024 and sell it today you would earn a total of 40.00 from holding Hitachi Construction Machinery or generate 1.92% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Sumitomo Mitsui Construction vs. Hitachi Construction Machinery
Performance |
Timeline |
Sumitomo Mitsui Cons |
Hitachi Construction |
Sumitomo Mitsui and Hitachi Construction Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Sumitomo Mitsui and Hitachi Construction
The main advantage of trading using opposite Sumitomo Mitsui and Hitachi Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Mitsui position performs unexpectedly, Hitachi Construction 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 Hitachi Construction will offset losses from the drop in Hitachi Construction's long position.Sumitomo Mitsui vs. Kaiser Aluminum | Sumitomo Mitsui vs. Japan Medical Dynamic | Sumitomo Mitsui vs. MEDICAL FACILITIES NEW | Sumitomo Mitsui vs. Merit Medical Systems |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
Other Complementary Tools
Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
ETFs Find actively traded Exchange Traded Funds (ETF) from around the world |