Correlation Between Hitachi Construction and Walgreens Boots

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Can any of the company-specific risk be diversified away by investing in both Hitachi Construction and Walgreens Boots 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 Walgreens Boots 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 Walgreens Boots Alliance, you can compare the effects of market volatilities on Hitachi Construction and Walgreens Boots 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 Walgreens Boots. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hitachi Construction and Walgreens Boots.

Diversification Opportunities for Hitachi Construction and Walgreens Boots

-0.33
  Correlation Coefficient

Very good diversification

The 3 months correlation between Hitachi and Walgreens is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi Construction Machinery and Walgreens Boots Alliance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walgreens Boots Alliance 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 Walgreens Boots. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walgreens Boots Alliance has no effect on the direction of Hitachi Construction i.e., Hitachi Construction and Walgreens Boots go up and down completely randomly.

Pair Corralation between Hitachi Construction and Walgreens Boots

Assuming the 90 days horizon Hitachi Construction Machinery is expected to generate 0.77 times more return on investment than Walgreens Boots. However, Hitachi Construction Machinery is 1.3 times less risky than Walgreens Boots. It trades about 0.01 of its potential returns per unit of risk. Walgreens Boots Alliance is currently generating about -0.09 per unit of risk. If you would invest  2,080  in Hitachi Construction Machinery on September 12, 2024 and sell it today you would earn a total of  100.00  from holding Hitachi Construction Machinery or generate 4.81% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Hitachi Construction Machinery  vs.  Walgreens Boots Alliance

 Performance 
       Timeline  
Hitachi Construction 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Hitachi Construction Machinery are ranked lower than 1 (%) 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.
Walgreens Boots Alliance 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Walgreens Boots Alliance are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Walgreens Boots may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hitachi Construction and Walgreens Boots Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hitachi Construction and Walgreens Boots

The main advantage of trading using opposite Hitachi Construction and Walgreens Boots positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hitachi Construction position performs unexpectedly, Walgreens Boots 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 Walgreens Boots will offset losses from the drop in Walgreens Boots' long position.
The idea behind Hitachi Construction Machinery and Walgreens Boots Alliance 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..

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