Correlation Between Hitachi Construction and Sinopec Shanghai
Can any of the company-specific risk be diversified away by investing in both Hitachi Construction and Sinopec Shanghai 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 Sinopec Shanghai 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 Sinopec Shanghai Petrochemical, you can compare the effects of market volatilities on Hitachi Construction and Sinopec Shanghai 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 Sinopec Shanghai. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hitachi Construction and Sinopec Shanghai.
Diversification Opportunities for Hitachi Construction and Sinopec Shanghai
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Hitachi and Sinopec is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi Construction Machinery and Sinopec Shanghai Petrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinopec Shanghai Pet 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 Sinopec Shanghai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinopec Shanghai Pet has no effect on the direction of Hitachi Construction i.e., Hitachi Construction and Sinopec Shanghai go up and down completely randomly.
Pair Corralation between Hitachi Construction and Sinopec Shanghai
Assuming the 90 days horizon Hitachi Construction Machinery is expected to under-perform the Sinopec Shanghai. But the stock apears to be less risky and, when comparing its historical volatility, Hitachi Construction Machinery is 2.18 times less risky than Sinopec Shanghai. The stock trades about -0.03 of its potential returns per unit of risk. The Sinopec Shanghai Petrochemical is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 12.00 in Sinopec Shanghai Petrochemical on October 19, 2024 and sell it today you would earn a total of 2.00 from holding Sinopec Shanghai Petrochemical or generate 16.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hitachi Construction Machinery vs. Sinopec Shanghai Petrochemical
Performance |
| Timeline |
| Hitachi Construction |
| Sinopec Shanghai Pet |
Hitachi Construction and Sinopec Shanghai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hitachi Construction and Sinopec Shanghai
The main advantage of trading using opposite Hitachi Construction and Sinopec Shanghai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hitachi Construction position performs unexpectedly, Sinopec Shanghai 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 Sinopec Shanghai will offset losses from the drop in Sinopec Shanghai's long position.| Hitachi Construction vs. Sumitomo Rubber Industries | Hitachi Construction vs. Rayonier Advanced Materials | Hitachi Construction vs. Minerals Technologies | Hitachi Construction vs. Sunny Optical Technology |
| Sinopec Shanghai vs. GEELY AUTOMOBILE | Sinopec Shanghai vs. Vishay Intertechnology | Sinopec Shanghai vs. Siamgas And Petrochemicals | Sinopec Shanghai vs. CARSALESCOM |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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