Correlation Between Hillenbrand and Makita Corp

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

By analyzing existing cross correlation between Hillenbrand and Makita Corp, you can compare the effects of market volatilities on Hillenbrand and Makita Corp 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 Hillenbrand with a short position of Makita Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hillenbrand and Makita Corp.

Diversification Opportunities for Hillenbrand and Makita Corp

0.85

Correlation Coefficient

Hillenbrand  Makita Corp

Very poor diversification

The 3 months correlation between Hillenbrand and Makita is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Hillenbrand and Makita Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Makita Corp and Hillenbrand 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 Hillenbrand are associated (or correlated) with Makita Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Makita Corp has no effect on the direction of Hillenbrand i.e., Hillenbrand and Makita Corp go up and down completely randomly.

Pair Corralation between Hillenbrand and Makita Corp

If you would invest  3,091  in Hillenbrand on August 31, 2024 and sell it today you would earn a total of  293.00  from holding Hillenbrand or generate 9.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	1.59%
Values	Daily Returns

Hillenbrand  vs.  Makita Corp

Hillenbrand

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hillenbrand are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, Hillenbrand may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Makita Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Makita Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Makita Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hillenbrand and Makita Corp

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

The idea behind Hillenbrand and Makita Corp 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..