Correlation Between Hollywood Bowl and Hitachi

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

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

Diversification Opportunities for Hollywood Bowl and Hitachi

0.34

Correlation Coefficient

Hollywood Bowl  Hitachi

Weak diversification

The 3 months correlation between Hollywood and Hitachi is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Hollywood Bowl Group and Hitachi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi and Hollywood Bowl 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 Hollywood Bowl Group are associated (or correlated) with Hitachi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hitachi has no effect on the direction of Hollywood Bowl i.e., Hollywood Bowl and Hitachi go up and down completely randomly.

Pair Corralation between Hollywood Bowl and Hitachi

Assuming the 90 days horizon Hollywood Bowl Group is expected to under-perform the Hitachi. But the stock apears to be less risky and, when comparing its historical volatility, Hollywood Bowl Group is 1.09 times less risky than Hitachi. The stock trades about -0.14 of its potential returns per unit of risk. The Hitachi is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,350  in Hitachi on October 23, 2024 and sell it today you would lose (9.00) from holding Hitachi or give up 0.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Hollywood Bowl Group  vs.  Hitachi

Hollywood Bowl Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hollywood Bowl Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Hitachi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hitachi has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Hitachi is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Hollywood Bowl and Hitachi

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

The idea behind Hollywood Bowl Group and Hitachi 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.