Correlation Between Japan Medical and Hitachi Construction
Can any of the company-specific risk be diversified away by investing in both Japan Medical and Hitachi Construction 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 Japan Medical and Hitachi Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Japan Medical Dynamic and Hitachi Construction Machinery, you can compare the effects of market volatilities on Japan Medical and Hitachi Construction 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 Japan Medical with a short position of Hitachi Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Medical and Hitachi Construction.
Diversification Opportunities for Japan Medical and Hitachi Construction
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Japan and Hitachi is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Japan Medical Dynamic and Hitachi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Construction and Japan Medical 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 Japan Medical Dynamic are associated (or correlated) with Hitachi Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hitachi Construction has no effect on the direction of Japan Medical i.e., Japan Medical and Hitachi Construction go up and down completely randomly.
Pair Corralation between Japan Medical and Hitachi Construction
Assuming the 90 days horizon Japan Medical is expected to generate 1.6 times less return on investment than Hitachi Construction. But when comparing it to its historical volatility, Japan Medical Dynamic is 1.1 times less risky than Hitachi Construction. It trades about 0.16 of its potential returns per unit of risk. Hitachi Construction Machinery is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 2,080 in Hitachi Construction Machinery on November 7, 2024 and sell it today you would earn a total of 180.00 from holding Hitachi Construction Machinery or generate 8.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Japan Medical Dynamic vs. Hitachi Construction Machinery
Performance |
| Timeline |
| Japan Medical Dynamic |
| Hitachi Construction |
Japan Medical and Hitachi Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Japan Medical and Hitachi Construction
The main advantage of trading using opposite Japan Medical and Hitachi Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Japan Medical position performs unexpectedly, Hitachi Construction 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 Hitachi Construction will offset losses from the drop in Hitachi Construction's long position.| Japan Medical vs. Singapore Reinsurance | Japan Medical vs. Apollo Investment Corp | Japan Medical vs. Gladstone Investment | Japan Medical vs. Direct Line Insurance |
| Hitachi Construction vs. VULCAN MATERIALS | Hitachi Construction vs. New Residential Investment | Hitachi Construction vs. NEWELL RUBBERMAID | Hitachi Construction vs. Goodyear Tire Rubber |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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