Correlation Between Hitachi and ITOCHU
Can any of the company-specific risk be diversified away by investing in both Hitachi and ITOCHU 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 ITOCHU 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 ITOCHU, you can compare the effects of market volatilities on Hitachi and ITOCHU 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 ITOCHU. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hitachi and ITOCHU.
Diversification Opportunities for Hitachi and ITOCHU
Very good diversification
The 3 months correlation between Hitachi and ITOCHU is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi Ltd ADR and ITOCHU in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITOCHU 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 ITOCHU. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITOCHU has no effect on the direction of Hitachi i.e., Hitachi and ITOCHU go up and down completely randomly.
Pair Corralation between Hitachi and ITOCHU
Assuming the 90 days horizon Hitachi Ltd ADR is expected to generate 1.96 times more return on investment than ITOCHU. However, Hitachi is 1.96 times more volatile than ITOCHU. It trades about 0.06 of its potential returns per unit of risk. ITOCHU is currently generating about 0.04 per unit of risk. If you would invest 1,002 in Hitachi Ltd ADR on November 27, 2024 and sell it today you would earn a total of 1,718 from holding Hitachi Ltd ADR or generate 171.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.17% |
| Values | Daily Returns |
Hitachi Ltd ADR vs. ITOCHU
Performance |
| Timeline |
| Hitachi Ltd ADR |
| ITOCHU |
Hitachi and ITOCHU Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hitachi and ITOCHU
The main advantage of trading using opposite Hitachi and ITOCHU positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hitachi position performs unexpectedly, ITOCHU 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 ITOCHU will offset losses from the drop in ITOCHU's long position.| Hitachi vs. Teijin | Hitachi vs. Jardine Matheson Holdings | Hitachi vs. Marubeni Corp ADR | Hitachi vs. Mitsubishi Corp |
| ITOCHU vs. Sumitomo Corp ADR | ITOCHU vs. Mitsui Co | ITOCHU vs. Marubeni Corp ADR | ITOCHU vs. Mitsubishi Corp |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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