Correlation Between TFS FINANCIAL and Hitachi Construction
Can any of the company-specific risk be diversified away by investing in both TFS FINANCIAL 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 TFS FINANCIAL and Hitachi Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TFS FINANCIAL and Hitachi Construction Machinery, you can compare the effects of market volatilities on TFS FINANCIAL 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 TFS FINANCIAL with a short position of Hitachi Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of TFS FINANCIAL and Hitachi Construction.
Diversification Opportunities for TFS FINANCIAL and Hitachi Construction
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between TFS and Hitachi is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding TFS FINANCIAL and Hitachi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Construction and TFS FINANCIAL 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 TFS FINANCIAL 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 TFS FINANCIAL i.e., TFS FINANCIAL and Hitachi Construction go up and down completely randomly.
Pair Corralation between TFS FINANCIAL and Hitachi Construction
Assuming the 90 days trading horizon TFS FINANCIAL is expected to generate 1.34 times more return on investment than Hitachi Construction. However, TFS FINANCIAL is 1.34 times more volatile than Hitachi Construction Machinery. It trades about 0.23 of its potential returns per unit of risk. Hitachi Construction Machinery is currently generating about 0.15 per unit of risk. If you would invest 1,180 in TFS FINANCIAL on September 3, 2024 and sell it today you would earn a total of 150.00 from holding TFS FINANCIAL or generate 12.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
TFS FINANCIAL vs. Hitachi Construction Machinery
Performance |
| Timeline |
| TFS FINANCIAL |
| Hitachi Construction |
TFS FINANCIAL and Hitachi Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TFS FINANCIAL and Hitachi Construction
The main advantage of trading using opposite TFS FINANCIAL and Hitachi Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TFS FINANCIAL 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.| TFS FINANCIAL vs. Gladstone Investment | TFS FINANCIAL vs. Infrastrutture Wireless Italiane | TFS FINANCIAL vs. WillScot Mobile Mini | TFS FINANCIAL vs. HK Electric Investments |
| Hitachi Construction vs. REVO INSURANCE SPA | Hitachi Construction vs. TFS FINANCIAL | Hitachi Construction vs. Cars Inc | Hitachi Construction vs. Geely Automobile 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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