Correlation Between Auto Trader and Hitachi Construction
Can any of the company-specific risk be diversified away by investing in both Auto Trader 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 Auto Trader and Hitachi Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Auto Trader Group and Hitachi Construction Machinery, you can compare the effects of market volatilities on Auto Trader 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 Auto Trader with a short position of Hitachi Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auto Trader and Hitachi Construction.
Diversification Opportunities for Auto Trader and Hitachi Construction
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Auto and Hitachi is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Auto Trader Group and Hitachi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Construction and Auto Trader 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 Auto Trader Group 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 Auto Trader i.e., Auto Trader and Hitachi Construction go up and down completely randomly.
Pair Corralation between Auto Trader and Hitachi Construction
Assuming the 90 days trading horizon Auto Trader Group is expected to under-perform the Hitachi Construction. In addition to that, Auto Trader is 1.05 times more volatile than Hitachi Construction Machinery. It trades about -0.03 of its total potential returns per unit of risk. Hitachi Construction Machinery is currently generating about 0.17 per unit of volatility. If you would invest 1,940 in Hitachi Construction Machinery on September 1, 2024 and sell it today you would earn a total of 140.00 from holding Hitachi Construction Machinery or generate 7.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Auto Trader Group vs. Hitachi Construction Machinery
Performance |
| Timeline |
| Auto Trader Group |
| Hitachi Construction |
Auto Trader and Hitachi Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Auto Trader and Hitachi Construction
The main advantage of trading using opposite Auto Trader and Hitachi Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Auto Trader 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.| Auto Trader vs. FORMPIPE SOFTWARE AB | Auto Trader vs. UNITED UTILITIES GR | Auto Trader vs. COPLAND ROAD CAPITAL | Auto Trader vs. Algonquin Power Utilities |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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