Correlation Between Hitachi and RCABS
Can any of the company-specific risk be diversified away by investing in both Hitachi and RCABS 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 RCABS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hitachi Ltd ADR and RCABS Inc, you can compare the effects of market volatilities on Hitachi and RCABS 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 RCABS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hitachi and RCABS.
Diversification Opportunities for Hitachi and RCABS
Significant diversification
The 3 months correlation between Hitachi and RCABS is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi Ltd ADR and RCABS Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCABS Inc 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 Ltd ADR are associated (or correlated) with RCABS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCABS Inc has no effect on the direction of Hitachi i.e., Hitachi and RCABS go up and down completely randomly.
Pair Corralation between Hitachi and RCABS
Assuming the 90 days horizon Hitachi is expected to generate 4.56 times less return on investment than RCABS. But when comparing it to its historical volatility, Hitachi Ltd ADR is 5.03 times less risky than RCABS. It trades about 0.11 of its potential returns per unit of risk. RCABS Inc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 0.09 in RCABS Inc on September 13, 2024 and sell it today you would earn a total of 0.01 from holding RCABS Inc or generate 11.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hitachi Ltd ADR vs. RCABS Inc
Performance |
| Timeline |
| Hitachi Ltd ADR |
| RCABS Inc |
Hitachi and RCABS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hitachi and RCABS
The main advantage of trading using opposite Hitachi and RCABS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hitachi position performs unexpectedly, RCABS 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 RCABS will offset losses from the drop in RCABS's long position.| Hitachi vs. Teijin | Hitachi vs. Jardine Matheson Holdings | Hitachi vs. Marubeni Corp ADR | Hitachi vs. Mitsubishi Corp |
| RCABS vs. Arca Continental SAB | RCABS vs. Becle SA de | RCABS vs. Aquagold International | RCABS vs. Morningstar Unconstrained Allocation |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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