Correlation Between Hitachi Construction and AmeraMex International

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

Diversification Opportunities for Hitachi Construction and AmeraMex International

0.24

Correlation Coefficient

Hitachi Construction  AmeraMex International

Modest diversification

The 3 months correlation between Hitachi and AmeraMex is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi Construction Machinery and AmeraMex International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AmeraMex International 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 AmeraMex International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AmeraMex International has no effect on the direction of Hitachi Construction i.e., Hitachi Construction and AmeraMex International go up and down completely randomly.

Pair Corralation between Hitachi Construction and AmeraMex International

Assuming the 90 days horizon Hitachi Construction Machinery is expected to generate 0.24 times more return on investment than AmeraMex International. However, Hitachi Construction Machinery is 4.16 times less risky than AmeraMex International. It trades about -0.02 of its potential returns per unit of risk. AmeraMex International is currently generating about -0.04 per unit of risk. If you would invest  4,700  in Hitachi Construction Machinery on September 12, 2024 and sell it today you would lose (165.00) from holding Hitachi Construction Machinery or give up 3.51% of portfolio value over 90 days.

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

Hitachi Construction Machinery  vs.  AmeraMex International

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. In spite of fairly strong primary indicators, Hitachi Construction is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

AmeraMex International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AmeraMex International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Hitachi Construction and AmeraMex International

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

The idea behind Hitachi Construction Machinery and AmeraMex International 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..