Correlation Between PT United and Hitachi Construction

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

By analyzing existing cross correlation between PT United Tractors and Hitachi Construction Machinery, you can compare the effects of market volatilities on PT United and Hitachi Construction 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 PT United with a short position of Hitachi Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of PT United and Hitachi Construction.

Diversification Opportunities for PT United and Hitachi Construction

0.12

Correlation Coefficient

PT United  Hitachi Construction

Average diversification

The 3 months correlation between UTY and Hitachi is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding PT United Tractors and Hitachi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Construction and PT United 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 PT United Tractors are associated (or correlated) with Hitachi Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hitachi Construction has no effect on the direction of PT United i.e., PT United and Hitachi Construction go up and down completely randomly.

Pair Corralation between PT United and Hitachi Construction

Assuming the 90 days horizon PT United Tractors is expected to generate 2.07 times more return on investment than Hitachi Construction. However, PT United is 2.07 times more volatile than Hitachi Construction Machinery. It trades about 0.02 of its potential returns per unit of risk. Hitachi Construction Machinery is currently generating about -0.01 per unit of risk. If you would invest  152.00  in PT United Tractors on September 3, 2024 and sell it today you would lose (1.00) from holding PT United Tractors or give up 0.66% of portfolio value over 90 days.

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

PT United Tractors  vs.  Hitachi Construction Machinery

PT United Tractors

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PT United Tractors are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, PT United is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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.

Pair Trading with PT United and Hitachi Construction

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

The idea behind PT United Tractors and Hitachi Construction Machinery 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.