Correlation Between Alamo and Hitachi Construction
Can any of the company-specific risk be diversified away by investing in both Alamo 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 Alamo and Hitachi Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alamo Group and Hitachi Construction Machinery, you can compare the effects of market volatilities on Alamo 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 Alamo with a short position of Hitachi Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alamo and Hitachi Construction.
Diversification Opportunities for Alamo and Hitachi Construction
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Alamo and Hitachi is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Alamo 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 Alamo 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 Alamo 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 Alamo i.e., Alamo and Hitachi Construction go up and down completely randomly.
Pair Corralation between Alamo and Hitachi Construction
Considering the 90-day investment horizon Alamo Group is expected to generate 1.1 times more return on investment than Hitachi Construction. However, Alamo is 1.1 times more volatile than Hitachi Construction Machinery. It trades about 0.27 of its potential returns per unit of risk. Hitachi Construction Machinery is currently generating about -0.15 per unit of risk. If you would invest 16,880 in Alamo Group on August 24, 2024 and sell it today you would earn a total of 2,930 from holding Alamo Group or generate 17.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alamo Group vs. Hitachi Construction Machinery
Performance |
| Timeline |
| Alamo Group |
| Hitachi Construction |
Alamo and Hitachi Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alamo and Hitachi Construction
The main advantage of trading using opposite Alamo and Hitachi Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alamo 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.| Alamo vs. Hyster Yale Materials Handling | Alamo vs. Columbus McKinnon | Alamo vs. AGCO Corporation | Alamo vs. Titan International |
| Hitachi Construction vs. Lion Electric Corp | Hitachi Construction vs. Nikola Corp | Hitachi Construction vs. Buhler Industries | Hitachi Construction vs. Toyota Industries |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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