Correlation Between Sumitomo Rubber and Hitachi Construction
Can any of the company-specific risk be diversified away by investing in both Sumitomo Rubber 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 Sumitomo Rubber and Hitachi Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sumitomo Rubber Industries and Hitachi Construction Machinery, you can compare the effects of market volatilities on Sumitomo Rubber 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 Sumitomo Rubber with a short position of Hitachi Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sumitomo Rubber and Hitachi Construction.
Diversification Opportunities for Sumitomo Rubber and Hitachi Construction
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Sumitomo and Hitachi is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Sumitomo Rubber Industries and Hitachi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Construction and Sumitomo Rubber 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 Sumitomo Rubber Industries 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 Sumitomo Rubber i.e., Sumitomo Rubber and Hitachi Construction go up and down completely randomly.
Pair Corralation between Sumitomo Rubber and Hitachi Construction
Assuming the 90 days horizon Sumitomo Rubber Industries is expected to under-perform the Hitachi Construction. But the stock apears to be less risky and, when comparing its historical volatility, Sumitomo Rubber Industries is 1.02 times less risky than Hitachi Construction. The stock trades about -0.14 of its potential returns per unit of risk. The Hitachi Construction Machinery is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 2,100 in Hitachi Construction Machinery on October 19, 2024 and sell it today you would earn a total of 0.00 from holding Hitachi Construction Machinery or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sumitomo Rubber Industries vs. Hitachi Construction Machinery
Performance |
| Timeline |
| Sumitomo Rubber Indu |
| Hitachi Construction |
Sumitomo Rubber and Hitachi Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sumitomo Rubber and Hitachi Construction
The main advantage of trading using opposite Sumitomo Rubber and Hitachi Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sumitomo Rubber 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.| Sumitomo Rubber vs. CANON MARKETING JP | Sumitomo Rubber vs. SALESFORCE INC CDR | Sumitomo Rubber vs. SIDETRADE EO 1 | Sumitomo Rubber vs. Taiwan Semiconductor Manufacturing |
| Hitachi Construction vs. Sumitomo Rubber Industries | Hitachi Construction vs. Rayonier Advanced Materials | Hitachi Construction vs. Minerals Technologies | Hitachi Construction vs. Sunny Optical Technology |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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