Correlation Between HITACHI CONSTRMACHADR/2 and Air Products

Can any of the company-specific risk be diversified away by investing in both HITACHI CONSTRMACHADR/2 and Air Products 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 CONSTRMACHADR/2 and Air Products into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HITACHI STRMACHADR2 and Air Products and, you can compare the effects of market volatilities on HITACHI CONSTRMACHADR/2 and Air Products 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 CONSTRMACHADR/2 with a short position of Air Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of HITACHI CONSTRMACHADR/2 and Air Products.

Diversification Opportunities for HITACHI CONSTRMACHADR/2 and Air Products

-0.59

Correlation Coefficient

HITACHI CONSTRMACHADR/2  Air Products

Excellent diversification

The 3 months correlation between HITACHI and Air is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding HITACHI STRMACHADR2 and Air Products and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products and HITACHI CONSTRMACHADR/2 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 STRMACHADR2 are associated (or correlated) with Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products has no effect on the direction of HITACHI CONSTRMACHADR/2 i.e., HITACHI CONSTRMACHADR/2 and Air Products go up and down completely randomly.

Pair Corralation between HITACHI CONSTRMACHADR/2 and Air Products

Assuming the 90 days trading horizon HITACHI STRMACHADR2 is expected to under-perform the Air Products. But the stock apears to be less risky and, when comparing its historical volatility, HITACHI STRMACHADR2 is 1.28 times less risky than Air Products. The stock trades about -0.03 of its potential returns per unit of risk. The Air Products and is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  24,975  in Air Products and on September 3, 2024 and sell it today you would earn a total of  6,555  from holding Air Products and or generate 26.25% return on investment over 90 days.

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

HITACHI STRMACHADR2  vs.  Air Products and

HITACHI CONSTRMACHADR/2

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HITACHI STRMACHADR2 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, HITACHI CONSTRMACHADR/2 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Air Products

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Air Products and are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Air Products reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HITACHI CONSTRMACHADR/2 and Air Products

The main advantage of trading using opposite HITACHI CONSTRMACHADR/2 and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HITACHI CONSTRMACHADR/2 position performs unexpectedly, Air Products 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 Air Products will offset losses from the drop in Air Products' long position.

The idea behind HITACHI STRMACHADR2 and Air Products and 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.