Correlation Between HK Electric and Hitachi Construction
Can any of the company-specific risk be diversified away by investing in both HK Electric 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 HK Electric and Hitachi Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HK Electric Investments and Hitachi Construction Machinery, you can compare the effects of market volatilities on HK Electric 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 HK Electric with a short position of Hitachi Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of HK Electric and Hitachi Construction.
Diversification Opportunities for HK Electric and Hitachi Construction
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between HKT and Hitachi is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding HK Electric Investments and Hitachi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Construction and HK Electric 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 HK Electric Investments 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 HK Electric i.e., HK Electric and Hitachi Construction go up and down completely randomly.
Pair Corralation between HK Electric and Hitachi Construction
Assuming the 90 days trading horizon HK Electric Investments is expected to generate 0.31 times more return on investment than Hitachi Construction. However, HK Electric Investments is 3.2 times less risky than Hitachi Construction. It trades about 0.1 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 62.00 in HK Electric Investments on August 25, 2024 and sell it today you would earn a total of 1.00 from holding HK Electric Investments or generate 1.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HK Electric Investments vs. Hitachi Construction Machinery
Performance |
| Timeline |
| HK Electric Investments |
| Hitachi Construction |
HK Electric and Hitachi Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HK Electric and Hitachi Construction
The main advantage of trading using opposite HK Electric and Hitachi Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HK Electric 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.| HK Electric vs. Apple Inc | HK Electric vs. Apple Inc | HK Electric vs. Apple Inc | HK Electric vs. Apple Inc |
| Hitachi Construction vs. KUBOTA P ADR20 | Hitachi Construction vs. Superior Plus Corp | Hitachi Construction vs. NMI Holdings | Hitachi Construction vs. Origin Agritech |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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