Correlation Between Carpenter Technology and Hitachi Construction

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

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

Diversification Opportunities for Carpenter Technology and Hitachi Construction

0.29

Correlation Coefficient

Carpenter Technology  Hitachi Construction

Modest diversification

The 3 months correlation between Carpenter and Hitachi is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Carpenter Technology and Hitachi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Construction and Carpenter Technology 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 Carpenter Technology 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 Carpenter Technology i.e., Carpenter Technology and Hitachi Construction go up and down completely randomly.

Pair Corralation between Carpenter Technology and Hitachi Construction

Considering the 90-day investment horizon Carpenter Technology is expected to generate 1.04 times less return on investment than Hitachi Construction. In addition to that, Carpenter Technology is 3.4 times more volatile than Hitachi Construction Machinery. It trades about 0.1 of its total potential returns per unit of risk. Hitachi Construction Machinery is currently generating about 0.37 per unit of volatility. If you would invest  4,854  in Hitachi Construction Machinery on December 5, 2024 and sell it today you would earn a total of  335.00  from holding Hitachi Construction Machinery or generate 6.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Carpenter Technology  vs.  Hitachi Construction Machinery

Carpenter Technology

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Carpenter Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Carpenter Technology is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Hitachi Construction

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hitachi Construction Machinery are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Hitachi Construction showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carpenter Technology and Hitachi Construction

The main advantage of trading using opposite Carpenter Technology and Hitachi Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carpenter Technology 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 Carpenter Technology 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.