Correlation Between Automobile and Hanshin Construction
Can any of the company-specific risk be diversified away by investing in both Automobile and Hanshin 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 Automobile and Hanshin Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Automobile Pc and Hanshin Construction Co, you can compare the effects of market volatilities on Automobile and Hanshin 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 Automobile with a short position of Hanshin Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automobile and Hanshin Construction.
Diversification Opportunities for Automobile and Hanshin Construction
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Automobile and Hanshin is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Automobile Pc and Hanshin Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanshin Construction and Automobile 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 Automobile Pc are associated (or correlated) with Hanshin Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanshin Construction has no effect on the direction of Automobile i.e., Automobile and Hanshin Construction go up and down completely randomly.
Pair Corralation between Automobile and Hanshin Construction
Assuming the 90 days trading horizon Automobile Pc is expected to under-perform the Hanshin Construction. In addition to that, Automobile is 1.9 times more volatile than Hanshin Construction Co. It trades about -0.06 of its total potential returns per unit of risk. Hanshin Construction Co is currently generating about -0.01 per unit of volatility. If you would invest 791,631 in Hanshin Construction Co on August 28, 2024 and sell it today you would lose (90,631) from holding Hanshin Construction Co or give up 11.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Automobile Pc vs. Hanshin Construction Co
Performance |
| Timeline |
| Automobile Pc |
| Hanshin Construction |
Automobile and Hanshin Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Automobile and Hanshin Construction
The main advantage of trading using opposite Automobile and Hanshin Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automobile position performs unexpectedly, Hanshin 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 Hanshin Construction will offset losses from the drop in Hanshin Construction's long position.| Automobile vs. Busan Industrial Co | Automobile vs. Busan Ind | Automobile vs. Mirae Asset Daewoo | Automobile vs. UNISEM Co |
| Hanshin Construction vs. Haesung Industrial Co | Hanshin Construction vs. Eagon Industrial Co | Hanshin Construction vs. Seoul Food Industrial | Hanshin Construction vs. Busan Industrial Co |
Check out your portfolio center.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..
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