Correlation Between Penta Ocean and Hitachi Construction
Can any of the company-specific risk be diversified away by investing in both Penta Ocean 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 Penta Ocean and Hitachi Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Penta Ocean Construction Co and Hitachi Construction Machinery, you can compare the effects of market volatilities on Penta Ocean 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 Penta Ocean with a short position of Hitachi Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penta Ocean and Hitachi Construction.
Diversification Opportunities for Penta Ocean and Hitachi Construction
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Penta and Hitachi is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Penta Ocean Construction Co and Hitachi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Construction and Penta Ocean 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 Penta Ocean Construction Co 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 Penta Ocean i.e., Penta Ocean and Hitachi Construction go up and down completely randomly.
Pair Corralation between Penta Ocean and Hitachi Construction
Assuming the 90 days horizon Penta Ocean Construction Co is expected to under-perform the Hitachi Construction. But the stock apears to be less risky and, when comparing its historical volatility, Penta Ocean Construction Co is 1.22 times less risky than Hitachi Construction. The stock trades about -0.07 of its potential returns per unit of risk. The Hitachi Construction Machinery is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 2,460 in Hitachi Construction Machinery on September 1, 2024 and sell it today you would lose (380.00) from holding Hitachi Construction Machinery or give up 15.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Penta Ocean Construction Co vs. Hitachi Construction Machinery
Performance |
| Timeline |
| Penta Ocean Construc |
| Hitachi Construction |
Penta Ocean and Hitachi Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Penta Ocean and Hitachi Construction
The main advantage of trading using opposite Penta Ocean and Hitachi Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penta Ocean 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.| Penta Ocean vs. Transurban Group | Penta Ocean vs. Jiangsu Expressway | Penta Ocean vs. Zhejiang Expressway Co | Penta Ocean vs. Arcosa Inc |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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