Correlation Between Hitachi Construction and Whitehaven Coal

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

Diversification Opportunities for Hitachi Construction and Whitehaven Coal

-0.03

Correlation Coefficient

Hitachi Construction  Whitehaven Coal

Good diversification

The 3 months correlation between Hitachi and Whitehaven is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi Construction Machinery and Whitehaven Coal Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whitehaven Coal 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 Whitehaven Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whitehaven Coal has no effect on the direction of Hitachi Construction i.e., Hitachi Construction and Whitehaven Coal go up and down completely randomly.

Pair Corralation between Hitachi Construction and Whitehaven Coal

Assuming the 90 days horizon Hitachi Construction is expected to generate 49.3 times less return on investment than Whitehaven Coal. But when comparing it to its historical volatility, Hitachi Construction Machinery is 1.1 times less risky than Whitehaven Coal. It trades about 0.0 of its potential returns per unit of risk. Whitehaven Coal Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  362.00  in Whitehaven Coal Limited on September 19, 2024 and sell it today you would earn a total of  27.00  from holding Whitehaven Coal Limited or generate 7.46% 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.  Whitehaven Coal Limited

Hitachi Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hitachi Construction Machinery has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Whitehaven Coal

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Whitehaven Coal Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Whitehaven Coal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hitachi Construction and Whitehaven Coal

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

The idea behind Hitachi Construction Machinery and Whitehaven Coal Limited 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.