Correlation Between Chongqing Machinery and Hitachi Construction
Can any of the company-specific risk be diversified away by investing in both Chongqing Machinery 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 Chongqing Machinery and Hitachi Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chongqing Machinery Electric and Hitachi Construction Machinery, you can compare the effects of market volatilities on Chongqing Machinery 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 Chongqing Machinery with a short position of Hitachi Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chongqing Machinery and Hitachi Construction.
Diversification Opportunities for Chongqing Machinery and Hitachi Construction
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Chongqing and Hitachi is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Chongqing Machinery Electric and Hitachi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Construction and Chongqing Machinery 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 Chongqing Machinery Electric 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 Chongqing Machinery i.e., Chongqing Machinery and Hitachi Construction go up and down completely randomly.
Pair Corralation between Chongqing Machinery and Hitachi Construction
Assuming the 90 days horizon Chongqing Machinery Electric is expected to generate 8.35 times more return on investment than Hitachi Construction. However, Chongqing Machinery is 8.35 times more volatile than Hitachi Construction Machinery. It trades about 0.21 of its potential returns per unit of risk. Hitachi Construction Machinery is currently generating about 0.22 per unit of risk. If you would invest 7.30 in Chongqing Machinery Electric on November 27, 2024 and sell it today you would earn a total of 3.70 from holding Chongqing Machinery Electric or generate 50.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chongqing Machinery Electric vs. Hitachi Construction Machinery
Performance |
| Timeline |
| Chongqing Machinery |
| Hitachi Construction |
Chongqing Machinery and Hitachi Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chongqing Machinery and Hitachi Construction
The main advantage of trading using opposite Chongqing Machinery and Hitachi Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chongqing Machinery 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.| Chongqing Machinery vs. Westinghouse Air Brake | Chongqing Machinery vs. UNIVMUSIC GRPADR050 | Chongqing Machinery vs. NH HOTEL GROUP | Chongqing Machinery vs. DELTA AIR LINES |
| Hitachi Construction vs. FLOW TRADERS LTD | Hitachi Construction vs. TRADEGATE | Hitachi Construction vs. Meiko Electronics Co | Hitachi Construction vs. H2O Retailing |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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