Correlation Between Murata Manufacturing and Hubbell Incorporated
Can any of the company-specific risk be diversified away by investing in both Murata Manufacturing and Hubbell Incorporated 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 Murata Manufacturing and Hubbell Incorporated into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Murata Manufacturing Co and Hubbell Incorporated, you can compare the effects of market volatilities on Murata Manufacturing and Hubbell Incorporated 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 Murata Manufacturing with a short position of Hubbell Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Murata Manufacturing and Hubbell Incorporated.
Diversification Opportunities for Murata Manufacturing and Hubbell Incorporated
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Murata and Hubbell is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Murata Manufacturing Co and Hubbell Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hubbell Incorporated and Murata Manufacturing 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 Murata Manufacturing Co are associated (or correlated) with Hubbell Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hubbell Incorporated has no effect on the direction of Murata Manufacturing i.e., Murata Manufacturing and Hubbell Incorporated go up and down completely randomly.
Pair Corralation between Murata Manufacturing and Hubbell Incorporated
Assuming the 90 days trading horizon Murata Manufacturing Co is expected to under-perform the Hubbell Incorporated. In addition to that, Murata Manufacturing is 1.04 times more volatile than Hubbell Incorporated. It trades about -0.03 of its total potential returns per unit of risk. Hubbell Incorporated is currently generating about 0.09 per unit of volatility. If you would invest 31,069 in Hubbell Incorporated on August 28, 2024 and sell it today you would earn a total of 12,731 from holding Hubbell Incorporated or generate 40.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Murata Manufacturing Co vs. Hubbell Incorporated
Performance |
| Timeline |
| Murata Manufacturing |
| Hubbell Incorporated |
Murata Manufacturing and Hubbell Incorporated Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Murata Manufacturing and Hubbell Incorporated
The main advantage of trading using opposite Murata Manufacturing and Hubbell Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Murata Manufacturing position performs unexpectedly, Hubbell Incorporated 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 Hubbell Incorporated will offset losses from the drop in Hubbell Incorporated's long position.The idea behind Murata Manufacturing Co and Hubbell Incorporated 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.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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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