Correlation Between North American and Hitachi Construction
Can any of the company-specific risk be diversified away by investing in both North American 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 North American and Hitachi Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between North American Construction and Hitachi Construction Machinery, you can compare the effects of market volatilities on North American 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 North American with a short position of Hitachi Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of North American and Hitachi Construction.
Diversification Opportunities for North American and Hitachi Construction
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between North and Hitachi is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction and Hitachi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Construction and North American 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 North American Construction 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 North American i.e., North American and Hitachi Construction go up and down completely randomly.
Pair Corralation between North American and Hitachi Construction
Assuming the 90 days horizon North American Construction is expected to generate 1.53 times more return on investment than Hitachi Construction. However, North American is 1.53 times more volatile than Hitachi Construction Machinery. It trades about 0.25 of its potential returns per unit of risk. Hitachi Construction Machinery is currently generating about 0.12 per unit of risk. If you would invest 1,570 in North American Construction on August 29, 2024 and sell it today you would earn a total of 300.00 from holding North American Construction or generate 19.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
North American Construction vs. Hitachi Construction Machinery
Performance |
| Timeline |
| North American Const |
| Hitachi Construction |
North American and Hitachi Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with North American and Hitachi Construction
The main advantage of trading using opposite North American and Hitachi Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American 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.| North American vs. NOV Inc | North American vs. Superior Plus Corp | North American vs. NMI Holdings | North American vs. SIVERS SEMICONDUCTORS AB |
| Hitachi Construction vs. CNH Industrial NV | Hitachi Construction vs. Terex | Hitachi Construction vs. Superior Plus Corp | Hitachi Construction vs. NMI 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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