Correlation Between Hitachi Construction and Kubota
Can any of the company-specific risk be diversified away by investing in both Hitachi Construction and Kubota 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 Kubota 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 Kubota, you can compare the effects of market volatilities on Hitachi Construction and Kubota 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 Kubota. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hitachi Construction and Kubota.
Diversification Opportunities for Hitachi Construction and Kubota
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hitachi and Kubota is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi Construction Machinery and Kubota in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kubota 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 Kubota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kubota has no effect on the direction of Hitachi Construction i.e., Hitachi Construction and Kubota go up and down completely randomly.
Pair Corralation between Hitachi Construction and Kubota
Assuming the 90 days horizon Hitachi Construction Machinery is expected to under-perform the Kubota. In addition to that, Hitachi Construction is 1.0 times more volatile than Kubota. It trades about -0.14 of its total potential returns per unit of risk. Kubota is currently generating about -0.12 per unit of volatility. If you would invest 1,450 in Kubota on August 28, 2024 and sell it today you would lose (192.00) from holding Kubota or give up 13.24% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hitachi Construction Machinery vs. Kubota
Performance |
| Timeline |
| Hitachi Construction |
| Kubota |
Hitachi Construction and Kubota Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hitachi Construction and Kubota
The main advantage of trading using opposite Hitachi Construction and Kubota positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hitachi Construction position performs unexpectedly, Kubota 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 Kubota will offset losses from the drop in Kubota's long position.| Hitachi Construction vs. Lion Electric Corp | Hitachi Construction vs. Nikola Corp | Hitachi Construction vs. Buhler Industries | Hitachi Construction vs. Toyota Industries |
| Kubota vs. Lion Electric Corp | Kubota vs. Nikola Corp | Kubota vs. Buhler Industries | Kubota vs. Toyota Industries |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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