Correlation Between Hanshin Construction and Stic Investments

Can any of the company-specific risk be diversified away by investing in both Hanshin Construction and Stic Investments 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 Hanshin Construction and Stic Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hanshin Construction Co and Stic Investments, you can compare the effects of market volatilities on Hanshin Construction and Stic Investments 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 Hanshin Construction with a short position of Stic Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hanshin Construction and Stic Investments.

Diversification Opportunities for Hanshin Construction and Stic Investments

-0.35

Correlation Coefficient

Hanshin Construction  Stic Investments

Very good diversification

The 3 months correlation between Hanshin and Stic is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Hanshin Construction Co and Stic Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stic Investments and Hanshin Construction 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 Hanshin Construction Co are associated (or correlated) with Stic Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stic Investments has no effect on the direction of Hanshin Construction i.e., Hanshin Construction and Stic Investments go up and down completely randomly.

Pair Corralation between Hanshin Construction and Stic Investments

Assuming the 90 days trading horizon Hanshin Construction Co is expected to under-perform the Stic Investments. In addition to that, Hanshin Construction is 1.36 times more volatile than Stic Investments. It trades about -0.06 of its total potential returns per unit of risk. Stic Investments is currently generating about 0.4 per unit of volatility. If you would invest  744,000  in Stic Investments on September 17, 2024 and sell it today you would earn a total of  129,000  from holding Stic Investments or generate 17.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Hanshin Construction Co  vs.  Stic Investments

Hanshin Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hanshin Construction Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hanshin Construction is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Stic Investments

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Stic Investments are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Stic Investments may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hanshin Construction and Stic Investments

The main advantage of trading using opposite Hanshin Construction and Stic Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hanshin Construction position performs unexpectedly, Stic Investments 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 Stic Investments will offset losses from the drop in Stic Investments' long position.

The idea behind Hanshin Construction Co and Stic Investments 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.