Correlation Between Hitachi and Citic
Can any of the company-specific risk be diversified away by investing in both Hitachi and Citic 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 and Citic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hitachi and Citic Ltd ADR, you can compare the effects of market volatilities on Hitachi and Citic 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 with a short position of Citic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hitachi and Citic.
Diversification Opportunities for Hitachi and Citic
Very weak diversification
The 3 months correlation between Hitachi and Citic is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi and Citic Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citic Ltd ADR and Hitachi 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 are associated (or correlated) with Citic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citic Ltd ADR has no effect on the direction of Hitachi i.e., Hitachi and Citic go up and down completely randomly.
Pair Corralation between Hitachi and Citic
Assuming the 90 days horizon Hitachi is expected to generate 3.9 times less return on investment than Citic. In addition to that, Hitachi is 1.92 times more volatile than Citic Ltd ADR. It trades about 0.01 of its total potential returns per unit of risk. Citic Ltd ADR is currently generating about 0.04 per unit of volatility. If you would invest 586.00 in Citic Ltd ADR on August 29, 2024 and sell it today you would earn a total of 21.00 from holding Citic Ltd ADR or generate 3.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.67% |
| Values | Daily Returns |
Hitachi vs. Citic Ltd ADR
Performance |
| Timeline |
| Hitachi |
| Citic Ltd ADR |
Hitachi and Citic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hitachi and Citic
The main advantage of trading using opposite Hitachi and Citic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hitachi position performs unexpectedly, Citic 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 Citic will offset losses from the drop in Citic's long position.The idea behind Hitachi and Citic Ltd ADR 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.| Citic vs. Honeywell International | Citic vs. MDU Resources Group | Citic vs. Compass Diversified Holdings | Citic vs. Valmont 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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