Correlation Between Hitachi Construction and AGRICULTBK HADR25
Can any of the company-specific risk be diversified away by investing in both Hitachi Construction and AGRICULTBK HADR25 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 AGRICULTBK HADR25 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 AGRICULTBK HADR25 YC, you can compare the effects of market volatilities on Hitachi Construction and AGRICULTBK HADR25 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 AGRICULTBK HADR25. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hitachi Construction and AGRICULTBK HADR25.
Diversification Opportunities for Hitachi Construction and AGRICULTBK HADR25
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Hitachi and AGRICULTBK is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi Construction Machinery and AGRICULTBK HADR25 YC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGRICULTBK HADR25 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 AGRICULTBK HADR25. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGRICULTBK HADR25 has no effect on the direction of Hitachi Construction i.e., Hitachi Construction and AGRICULTBK HADR25 go up and down completely randomly.
Pair Corralation between Hitachi Construction and AGRICULTBK HADR25
Assuming the 90 days horizon Hitachi Construction is expected to generate 11.4 times less return on investment than AGRICULTBK HADR25. But when comparing it to its historical volatility, Hitachi Construction Machinery is 1.2 times less risky than AGRICULTBK HADR25. It trades about 0.02 of its potential returns per unit of risk. AGRICULTBK HADR25 YC is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 960.00 in AGRICULTBK HADR25 YC on September 7, 2024 and sell it today you would earn a total of 230.00 from holding AGRICULTBK HADR25 YC or generate 23.96% 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. AGRICULTBK HADR25 YC
Performance |
Timeline |
Hitachi Construction |
AGRICULTBK HADR25 |
Hitachi Construction and AGRICULTBK HADR25 Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Hitachi Construction and AGRICULTBK HADR25
The main advantage of trading using opposite Hitachi Construction and AGRICULTBK HADR25 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hitachi Construction position performs unexpectedly, AGRICULTBK HADR25 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 AGRICULTBK HADR25 will offset losses from the drop in AGRICULTBK HADR25's long position.The idea behind Hitachi Construction Machinery and AGRICULTBK HADR25 YC 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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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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