Correlation Between Citic and Hitachi
Can any of the company-specific risk be diversified away by investing in both Citic and Hitachi 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 Citic and Hitachi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Citic Ltd ADR and Hitachi Ltd ADR, you can compare the effects of market volatilities on Citic and Hitachi 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 Citic with a short position of Hitachi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citic and Hitachi.
Diversification Opportunities for Citic and Hitachi
Weak diversification
The 3 months correlation between Citic and Hitachi is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Citic Ltd ADR and Hitachi Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Ltd ADR and Citic 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 Citic Ltd ADR are associated (or correlated) with Hitachi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hitachi Ltd ADR has no effect on the direction of Citic i.e., Citic and Hitachi go up and down completely randomly.
Pair Corralation between Citic and Hitachi
Assuming the 90 days horizon Citic is expected to generate 3.47 times less return on investment than Hitachi. But when comparing it to its historical volatility, Citic Ltd ADR is 2.01 times less risky than Hitachi. It trades about 0.03 of its potential returns per unit of risk. Hitachi Ltd ADR is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,002 in Hitachi Ltd ADR on November 27, 2024 and sell it today you would earn a total of 1,718 from holding Hitachi Ltd ADR or generate 171.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 70.24% |
| Values | Daily Returns |
Citic Ltd ADR vs. Hitachi Ltd ADR
Performance |
| Timeline |
| Citic Ltd ADR |
| Hitachi Ltd ADR |
Citic and Hitachi Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Citic and Hitachi
The main advantage of trading using opposite Citic and Hitachi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citic position performs unexpectedly, Hitachi 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 will offset losses from the drop in Hitachi's long position.| Citic vs. Honeywell International | Citic vs. MDU Resources Group | Citic vs. Compass Diversified Holdings | Citic vs. Valmont Industries |
| Hitachi vs. Teijin | Hitachi vs. Jardine Matheson Holdings | Hitachi vs. Marubeni Corp ADR | Hitachi vs. Mitsubishi Corp |
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 Directory module to find actively traded commodities issued by global exchanges.
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