Correlation Between CARSALESCOM and Hitachi Construction

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Can any of the company-specific risk be diversified away by investing in both CARSALESCOM 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 CARSALESCOM and Hitachi Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CARSALESCOM and Hitachi Construction Machinery, you can compare the effects of market volatilities on CARSALESCOM 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 CARSALESCOM with a short position of Hitachi Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of CARSALESCOM and Hitachi Construction.

Diversification Opportunities for CARSALESCOM and Hitachi Construction

CARSALESCOMHitachiDiversified AwayCARSALESCOMHitachiDiversified Away100%
0.07
  Correlation Coefficient

Significant diversification

The 3 months correlation between CARSALESCOM and Hitachi is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding CARSALESCOM and Hitachi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Construction and CARSALESCOM 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 CARSALESCOM 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 CARSALESCOM i.e., CARSALESCOM and Hitachi Construction go up and down completely randomly.

Pair Corralation between CARSALESCOM and Hitachi Construction

Assuming the 90 days trading horizon CARSALESCOM is expected to generate 1.26 times less return on investment than Hitachi Construction. In addition to that, CARSALESCOM is 1.13 times more volatile than Hitachi Construction Machinery. It trades about 0.25 of its total potential returns per unit of risk. Hitachi Construction Machinery is currently generating about 0.35 per unit of volatility. If you would invest  2,060  in Hitachi Construction Machinery on October 30, 2024 and sell it today you would earn a total of  220.00  from holding Hitachi Construction Machinery or generate 10.68% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

CARSALESCOM  vs.  Hitachi Construction Machinery

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 -50510
JavaScript chart by amCharts 3.21.15WN6 HCM
       Timeline  
CARSALESCOM 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in CARSALESCOM are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, CARSALESCOM is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan21.52222.52323.52424.52525.526
Hitachi Construction 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Hitachi Construction Machinery are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hitachi Construction reported solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan19.52020.52121.52222.5

CARSALESCOM and Hitachi Construction Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-5.05-3.78-2.51-1.250.02141.262.553.835.11 0.050.100.15
JavaScript chart by amCharts 3.21.15WN6 HCM
       Returns  

Pair Trading with CARSALESCOM and Hitachi Construction

The main advantage of trading using opposite CARSALESCOM and Hitachi Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CARSALESCOM 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.
The idea behind CARSALESCOM and Hitachi Construction Machinery pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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