Correlation Between FLOW TRADERS and Hitachi Construction
Can any of the company-specific risk be diversified away by investing in both FLOW TRADERS 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 FLOW TRADERS and Hitachi Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FLOW TRADERS LTD and Hitachi Construction Machinery, you can compare the effects of market volatilities on FLOW TRADERS 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 FLOW TRADERS with a short position of Hitachi Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of FLOW TRADERS and Hitachi Construction.
Diversification Opportunities for FLOW TRADERS and Hitachi Construction
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between FLOW and Hitachi is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding FLOW TRADERS LTD and Hitachi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Construction and FLOW TRADERS 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 FLOW TRADERS LTD 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 FLOW TRADERS i.e., FLOW TRADERS and Hitachi Construction go up and down completely randomly.
Pair Corralation between FLOW TRADERS and Hitachi Construction
Assuming the 90 days horizon FLOW TRADERS is expected to generate 13.35 times less return on investment than Hitachi Construction. But when comparing it to its historical volatility, FLOW TRADERS LTD is 1.51 times less risky than Hitachi Construction. It trades about 0.02 of its potential returns per unit of risk. Hitachi Construction Machinery is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 1,940 in Hitachi Construction Machinery on September 1, 2024 and sell it today you would earn a total of 140.00 from holding Hitachi Construction Machinery or generate 7.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FLOW TRADERS LTD vs. Hitachi Construction Machinery
Performance |
| Timeline |
| FLOW TRADERS LTD |
| Hitachi Construction |
FLOW TRADERS and Hitachi Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FLOW TRADERS and Hitachi Construction
The main advantage of trading using opposite FLOW TRADERS and Hitachi Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FLOW TRADERS 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.| FLOW TRADERS vs. Morgan Stanley | FLOW TRADERS vs. The Goldman Sachs | FLOW TRADERS vs. Superior Plus Corp | FLOW TRADERS 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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