Correlation Between Hitachi Construction and EQT AB
Can any of the company-specific risk be diversified away by investing in both Hitachi Construction and EQT AB 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 EQT AB 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 EQT AB, you can compare the effects of market volatilities on Hitachi Construction and EQT AB 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 EQT AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hitachi Construction and EQT AB.
Diversification Opportunities for Hitachi Construction and EQT AB
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hitachi and EQT is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi Construction Machinery and EQT AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EQT AB 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 EQT AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EQT AB has no effect on the direction of Hitachi Construction i.e., Hitachi Construction and EQT AB go up and down completely randomly.
Pair Corralation between Hitachi Construction and EQT AB
Assuming the 90 days horizon Hitachi Construction is expected to generate 3.33 times less return on investment than EQT AB. But when comparing it to its historical volatility, Hitachi Construction Machinery is 1.94 times less risky than EQT AB. It trades about 0.19 of its potential returns per unit of risk. EQT AB is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 2,374 in EQT AB on September 20, 2024 and sell it today you would earn a total of 417.00 from holding EQT AB or generate 17.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hitachi Construction Machinery vs. EQT AB
Performance |
| Timeline |
| Hitachi Construction |
| EQT AB |
Hitachi Construction and EQT AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hitachi Construction and EQT AB
The main advantage of trading using opposite Hitachi Construction and EQT AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hitachi Construction position performs unexpectedly, EQT AB 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 EQT AB will offset losses from the drop in EQT AB's long position.| Hitachi Construction vs. Superior Plus Corp | Hitachi Construction vs. SIVERS SEMICONDUCTORS AB | Hitachi Construction vs. NorAm Drilling AS | Hitachi Construction vs. Norsk Hydro ASA |
| EQT AB vs. Ameriprise Financial | EQT AB vs. Ares Management Corp | EQT AB vs. Superior Plus Corp | EQT AB vs. SIVERS SEMICONDUCTORS AB |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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