Correlation Between CITIC and Hitachi

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

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

Diversification Opportunities for CITIC and Hitachi

0.06

Correlation Coefficient

CITIC  Hitachi

Significant diversification

The 3 months correlation between CITIC and Hitachi is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding CITIC Limited and Hitachi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi and CITIC 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 CITIC Limited 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 CITIC i.e., CITIC and Hitachi go up and down completely randomly.

Pair Corralation between CITIC and Hitachi

Assuming the 90 days horizon CITIC Limited is expected to generate 0.86 times more return on investment than Hitachi. However, CITIC Limited is 1.16 times less risky than Hitachi. It trades about 0.01 of its potential returns per unit of risk. Hitachi is currently generating about -0.05 per unit of risk. If you would invest  111.00  in CITIC Limited on December 29, 2024 and sell it today you would earn a total of  0.00  from holding CITIC Limited or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

CITIC Limited  vs.  Hitachi

CITIC Limited

Risk-Adjusted Performance

Very Weak

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

Hitachi

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hitachi has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with CITIC and Hitachi

The main advantage of trading using opposite CITIC and Hitachi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CITIC 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 CITIC Limited 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.