Correlation Between ZhongAn Online and Hitachi Construction

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

By analyzing existing cross correlation between ZhongAn Online P and Hitachi Construction Machinery, you can compare the effects of market volatilities on ZhongAn Online 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 ZhongAn Online with a short position of Hitachi Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of ZhongAn Online and Hitachi Construction.

Diversification Opportunities for ZhongAn Online and Hitachi Construction

0.58

Correlation Coefficient

ZhongAn Online  Hitachi Construction

Very weak diversification

The 3 months correlation between ZhongAn and Hitachi is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding ZhongAn Online P and Hitachi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Construction and ZhongAn Online 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 ZhongAn Online P 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 ZhongAn Online i.e., ZhongAn Online and Hitachi Construction go up and down completely randomly.

Pair Corralation between ZhongAn Online and Hitachi Construction

Assuming the 90 days trading horizon ZhongAn Online is expected to generate 1.74 times less return on investment than Hitachi Construction. In addition to that, ZhongAn Online is 2.09 times more volatile than Hitachi Construction Machinery. It trades about 0.06 of its total potential returns per unit of risk. Hitachi Construction Machinery is currently generating about 0.21 per unit of volatility. If you would invest  2,040  in Hitachi Construction Machinery on December 23, 2024 and sell it today you would earn a total of  560.00  from holding Hitachi Construction Machinery or generate 27.45% return on investment over 90 days.

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

ZhongAn Online P  vs.  Hitachi Construction Machinery

ZhongAn Online P

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ZhongAn Online P are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, ZhongAn Online unveiled solid returns over the last few months and may actually be approaching a breakup point.

Hitachi Construction

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hitachi Construction Machinery are ranked lower than 16 (%) 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.

Pair Trading with ZhongAn Online and Hitachi Construction

The main advantage of trading using opposite ZhongAn Online and Hitachi Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ZhongAn Online 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 ZhongAn Online P 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.