Correlation Between X FAB and Hitachi Construction
Can any of the company-specific risk be diversified away by investing in both X FAB 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 X FAB and Hitachi Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between X FAB Silicon Foundries and Hitachi Construction Machinery, you can compare the effects of market volatilities on X FAB 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 X FAB with a short position of Hitachi Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of X FAB and Hitachi Construction.
Diversification Opportunities for X FAB and Hitachi Construction
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between XFB and Hitachi is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding X FAB Silicon Foundries and Hitachi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Construction and X FAB 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 X FAB Silicon Foundries 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 X FAB i.e., X FAB and Hitachi Construction go up and down completely randomly.
Pair Corralation between X FAB and Hitachi Construction
Assuming the 90 days trading horizon X FAB Silicon Foundries is expected to under-perform the Hitachi Construction. In addition to that, X FAB is 1.35 times more volatile than Hitachi Construction Machinery. It trades about -0.08 of its total potential returns per unit of risk. Hitachi Construction Machinery is currently generating about -0.01 per unit of volatility. If you would invest 2,440 in Hitachi Construction Machinery on September 15, 2024 and sell it today you would lose (260.00) from holding Hitachi Construction Machinery or give up 10.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
X FAB Silicon Foundries vs. Hitachi Construction Machinery
Performance |
| Timeline |
| X FAB Silicon |
| Hitachi Construction |
X FAB and Hitachi Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with X FAB and Hitachi Construction
The main advantage of trading using opposite X FAB and Hitachi Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X FAB 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 X FAB Silicon Foundries 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.| Hitachi Construction vs. Silicon Motion Technology | Hitachi Construction vs. MOVIE GAMES SA | Hitachi Construction vs. Eastman Chemical | Hitachi Construction vs. X FAB Silicon Foundries |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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