Correlation Between AUST AGRICULTURAL and Hitachi Construction
Can any of the company-specific risk be diversified away by investing in both AUST AGRICULTURAL 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 AUST AGRICULTURAL and Hitachi Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AUST AGRICULTURAL and Hitachi Construction Machinery, you can compare the effects of market volatilities on AUST AGRICULTURAL 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 AUST AGRICULTURAL with a short position of Hitachi Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of AUST AGRICULTURAL and Hitachi Construction.
Diversification Opportunities for AUST AGRICULTURAL and Hitachi Construction
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between AUST and Hitachi is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding AUST AGRICULTURAL and Hitachi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Construction and AUST AGRICULTURAL 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 AUST AGRICULTURAL 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 AUST AGRICULTURAL i.e., AUST AGRICULTURAL and Hitachi Construction go up and down completely randomly.
Pair Corralation between AUST AGRICULTURAL and Hitachi Construction
Assuming the 90 days trading horizon AUST AGRICULTURAL is expected to under-perform the Hitachi Construction. But the stock apears to be less risky and, when comparing its historical volatility, AUST AGRICULTURAL is 2.0 times less risky than Hitachi Construction. The stock trades about -0.04 of its potential returns per unit of risk. The Hitachi Construction Machinery is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,970 in Hitachi Construction Machinery on August 29, 2024 and sell it today you would earn a total of 110.00 from holding Hitachi Construction Machinery or generate 5.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
AUST AGRICULTURAL vs. Hitachi Construction Machinery
Performance |
| Timeline |
| AUST AGRICULTURAL |
| Hitachi Construction |
AUST AGRICULTURAL and Hitachi Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AUST AGRICULTURAL and Hitachi Construction
The main advantage of trading using opposite AUST AGRICULTURAL and Hitachi Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AUST AGRICULTURAL 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.| AUST AGRICULTURAL vs. Astral Foods Limited | AUST AGRICULTURAL vs. Food Life Companies | AUST AGRICULTURAL vs. Gol Intelligent Airlines | AUST AGRICULTURAL vs. Charoen Pokphand Foods |
| Hitachi Construction vs. CNH Industrial NV | Hitachi Construction vs. Terex | Hitachi Construction vs. Superior Plus Corp | Hitachi Construction vs. NMI Holdings |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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