Correlation Between CENTURIA OFFICE and Hitachi Construction

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

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

Diversification Opportunities for CENTURIA OFFICE and Hitachi Construction

0.2

Correlation Coefficient

CENTURIA OFFICE  Hitachi Construction

Modest diversification

The 3 months correlation between CENTURIA and Hitachi is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding CENTURIA OFFICE REIT and Hitachi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Construction and CENTURIA OFFICE 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 CENTURIA OFFICE REIT 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 CENTURIA OFFICE i.e., CENTURIA OFFICE and Hitachi Construction go up and down completely randomly.

Pair Corralation between CENTURIA OFFICE and Hitachi Construction

Assuming the 90 days horizon CENTURIA OFFICE REIT is expected to generate 0.68 times more return on investment than Hitachi Construction. However, CENTURIA OFFICE REIT is 1.47 times less risky than Hitachi Construction. It trades about -0.01 of its potential returns per unit of risk. Hitachi Construction Machinery is currently generating about -0.06 per unit of risk. If you would invest  65.00  in CENTURIA OFFICE REIT on September 29, 2024 and sell it today you would lose (2.00) from holding CENTURIA OFFICE REIT or give up 3.08% of portfolio value over 90 days.

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

CENTURIA OFFICE REIT  vs.  Hitachi Construction Machinery

CENTURIA OFFICE REIT

Risk-Adjusted Performance

0 of 100

Very Weak

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

Hitachi Construction

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with CENTURIA OFFICE and Hitachi Construction

The main advantage of trading using opposite CENTURIA OFFICE and Hitachi Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CENTURIA OFFICE 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 CENTURIA OFFICE REIT 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.