Correlation Between Hitachi Construction and ZhongAn Online

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Can any of the company-specific risk be diversified away by investing in both Hitachi Construction and ZhongAn Online 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 Hitachi Construction and ZhongAn Online into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hitachi Construction Machinery and ZhongAn Online P, you can compare the effects of market volatilities on Hitachi Construction and ZhongAn Online 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 Hitachi Construction with a short position of ZhongAn Online. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hitachi Construction and ZhongAn Online.

Diversification Opportunities for Hitachi Construction and ZhongAn Online

-0.1
  Correlation Coefficient

Good diversification

The 3 months correlation between Hitachi and ZhongAn is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi Construction Machinery and ZhongAn Online P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZhongAn Online P and Hitachi Construction 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 Hitachi Construction Machinery are associated (or correlated) with ZhongAn Online. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZhongAn Online P has no effect on the direction of Hitachi Construction i.e., Hitachi Construction and ZhongAn Online go up and down completely randomly.

Pair Corralation between Hitachi Construction and ZhongAn Online

Assuming the 90 days horizon Hitachi Construction Machinery is expected to generate 0.47 times more return on investment than ZhongAn Online. However, Hitachi Construction Machinery is 2.14 times less risky than ZhongAn Online. It trades about 0.22 of its potential returns per unit of risk. ZhongAn Online P is currently generating about -0.11 per unit of risk. If you would invest  2,020  in Hitachi Construction Machinery on October 20, 2024 and sell it today you would earn a total of  100.00  from holding Hitachi Construction Machinery or generate 4.95% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy94.44%
ValuesDaily Returns

Hitachi Construction Machinery  vs.  ZhongAn Online P

 Performance 
       Timeline  
Hitachi Construction 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Hitachi Construction Machinery are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Hitachi Construction is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
ZhongAn Online P 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days ZhongAn Online P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Hitachi Construction and ZhongAn Online Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hitachi Construction and ZhongAn Online

The main advantage of trading using opposite Hitachi Construction and ZhongAn Online positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hitachi Construction position performs unexpectedly, ZhongAn Online 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 ZhongAn Online will offset losses from the drop in ZhongAn Online's long position.
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The idea behind Hitachi Construction Machinery and ZhongAn Online P pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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