Correlation Between Insurance Australia and Hitachi Construction
Can any of the company-specific risk be diversified away by investing in both Insurance Australia 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 Insurance Australia and Hitachi Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Insurance Australia Group and Hitachi Construction Machinery, you can compare the effects of market volatilities on Insurance Australia 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 Insurance Australia with a short position of Hitachi Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Insurance Australia and Hitachi Construction.
Diversification Opportunities for Insurance Australia and Hitachi Construction
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Insurance and Hitachi is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Insurance Australia Group and Hitachi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Construction and Insurance Australia 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 Insurance Australia Group 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 Insurance Australia i.e., Insurance Australia and Hitachi Construction go up and down completely randomly.
Pair Corralation between Insurance Australia and Hitachi Construction
Assuming the 90 days horizon Insurance Australia Group is expected to generate 0.89 times more return on investment than Hitachi Construction. However, Insurance Australia Group is 1.12 times less risky than Hitachi Construction. It trades about 0.23 of its potential returns per unit of risk. Hitachi Construction Machinery is currently generating about 0.16 per unit of risk. If you would invest 500.00 in Insurance Australia Group on October 25, 2024 and sell it today you would earn a total of 25.00 from holding Insurance Australia Group or generate 5.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Insurance Australia Group vs. Hitachi Construction Machinery
Performance |
| Timeline |
| Insurance Australia |
| Hitachi Construction |
Insurance Australia and Hitachi Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Insurance Australia and Hitachi Construction
The main advantage of trading using opposite Insurance Australia and Hitachi Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insurance Australia 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.| Insurance Australia vs. PennantPark Investment | Insurance Australia vs. Japan Asia Investment | Insurance Australia vs. HK Electric Investments | Insurance Australia vs. Guangdong Investment Limited |
| Hitachi Construction vs. TT Electronics PLC | Hitachi Construction vs. Thai Beverage Public | Hitachi Construction vs. VIRGIN WINES UK | Hitachi Construction vs. VIVA WINE GROUP |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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