Correlation Between Hitachi Construction and ZhongAn Online

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

By analyzing existing cross correlation between Hitachi Construction Machinery and ZhongAn Online P, you can compare the effects of market volatilities on Hitachi Construction and ZhongAn Online 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 Hitachi Construction with a short position of ZhongAn Online. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hitachi Construction and ZhongAn Online.

Diversification Opportunities for Hitachi Construction and ZhongAn Online

-0.1

Correlation Coefficient

Hitachi Construction  ZhongAn Online

Good diversification

The 3 months correlation between Hitachi and ZhongAn is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi Construction Machinery and ZhongAn Online P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZhongAn Online P and Hitachi Construction 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 Hitachi Construction Machinery are associated (or correlated) with ZhongAn Online. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZhongAn Online P has no effect on the direction of Hitachi Construction i.e., Hitachi Construction and ZhongAn Online go up and down completely randomly.

Pair Corralation between Hitachi Construction and ZhongAn Online

Assuming the 90 days horizon Hitachi Construction is expected to generate 10.74 times less return on investment than ZhongAn Online. But when comparing it to its historical volatility, Hitachi Construction Machinery is 3.18 times less risky than ZhongAn Online. It trades about 0.04 of its potential returns per unit of risk. ZhongAn Online P is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  102.00  in ZhongAn Online P on September 14, 2024 and sell it today you would earn a total of  51.00  from holding ZhongAn Online P or generate 50.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Hitachi Construction Machinery  vs.  ZhongAn Online P

Hitachi Construction

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hitachi Construction Machinery are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Hitachi Construction is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ZhongAn Online P

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ZhongAn Online P are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, ZhongAn Online reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hitachi Construction and ZhongAn Online

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

The idea behind Hitachi Construction Machinery and ZhongAn Online P 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.