Correlation Between Hitachi and Swire Pacific
Can any of the company-specific risk be diversified away by investing in both Hitachi and Swire Pacific 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 Swire Pacific 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 Swire Pacific Ltd, you can compare the effects of market volatilities on Hitachi and Swire Pacific 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 Swire Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hitachi and Swire Pacific.
Diversification Opportunities for Hitachi and Swire Pacific
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Hitachi and Swire is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi Ltd ADR and Swire Pacific Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swire Pacific 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 Swire Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swire Pacific has no effect on the direction of Hitachi i.e., Hitachi and Swire Pacific go up and down completely randomly.
Pair Corralation between Hitachi and Swire Pacific
Assuming the 90 days horizon Hitachi Ltd ADR is expected to generate 1.02 times more return on investment than Swire Pacific. However, Hitachi is 1.02 times more volatile than Swire Pacific Ltd. It trades about 0.07 of its potential returns per unit of risk. Swire Pacific Ltd is currently generating about 0.02 per unit of risk. If you would invest 4,084 in Hitachi Ltd ADR on September 3, 2024 and sell it today you would earn a total of 944.00 from holding Hitachi Ltd ADR or generate 23.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.2% |
| Values | Daily Returns |
Hitachi Ltd ADR vs. Swire Pacific Ltd
Performance |
| Timeline |
| Hitachi Ltd ADR |
| Swire Pacific |
Hitachi and Swire Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hitachi and Swire Pacific
The main advantage of trading using opposite Hitachi and Swire Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hitachi position performs unexpectedly, Swire Pacific 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 Swire Pacific will offset losses from the drop in Swire Pacific's long position.| Hitachi vs. Teijin | Hitachi vs. Jardine Matheson Holdings | Hitachi vs. Marubeni Corp ADR | Hitachi vs. Mitsubishi Corp |
| Swire Pacific vs. CITIC Limited | Swire Pacific vs. Fosun International | Swire Pacific vs. Cibl Inc | Swire Pacific vs. Jardine Matheson Holdings |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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