Correlation Between Dow Jones and Hitachi Construction
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Hitachi Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Hitachi Construction Machinery, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Hitachi Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Hitachi Construction.
Diversification Opportunities for Dow Jones and Hitachi Construction
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Dow and Hitachi is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Hitachi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Construction and Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Hitachi Construction go up and down completely randomly.
Pair Corralation between Dow Jones and Hitachi Construction
Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.51 times more return on investment than Hitachi Construction. However, Dow Jones Industrial is 1.95 times less risky than Hitachi Construction. It trades about 0.17 of its potential returns per unit of risk. Hitachi Construction Machinery is currently generating about 0.01 per unit of risk. If you would invest 4,232,687 in Dow Jones Industrial on October 19, 2024 and sell it today you would earn a total of 116,096 from holding Dow Jones Industrial or generate 2.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 80.95% |
| Values | Daily Returns |
Dow Jones Industrial vs. Hitachi Construction Machinery
Performance |
| Timeline |
Dow Jones and Hitachi Construction Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Hitachi Construction Machinery
Pair trading matchups for Hitachi Construction
Pair Trading with Dow Jones and Hitachi Construction
The main advantage of trading using opposite Dow Jones and Hitachi Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Aluminum of | Dow Jones vs. Adtalem Global Education | Dow Jones vs. East Africa Metals | Dow Jones vs. Western Copper and |
| Hitachi Construction vs. Sumitomo Rubber Industries | Hitachi Construction vs. Rayonier Advanced Materials | Hitachi Construction vs. Minerals Technologies | Hitachi Construction vs. Sunny Optical Technology |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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