Correlation Between Dupont De and Hitachi

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

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

Diversification Opportunities for Dupont De and Hitachi

0.53

Correlation Coefficient

Dupont De  Hitachi

Very weak diversification

The 3 months correlation between Dupont and Hitachi is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and Hitachi Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Ltd ADR and Dupont De 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 Dupont De Nemours 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 Ltd ADR has no effect on the direction of Dupont De i.e., Dupont De and Hitachi go up and down completely randomly.

Pair Corralation between Dupont De and Hitachi

Allowing for the 90-day total investment horizon Dupont De Nemours is expected to under-perform the Hitachi. But the stock apears to be less risky and, when comparing its historical volatility, Dupont De Nemours is 9.67 times less risky than Hitachi. The stock trades about -0.01 of its potential returns per unit of risk. The Hitachi Ltd ADR is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,504  in Hitachi Ltd ADR on December 28, 2024 and sell it today you would lose (109.00) from holding Hitachi Ltd ADR or give up 4.35% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Dupont De Nemours  vs.  Hitachi Ltd ADR

Dupont De Nemours

Risk-Adjusted Performance

Weak

Over the last 90 days Dupont De Nemours has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Dupont De is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Hitachi Ltd ADR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hitachi Ltd ADR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile forward indicators, Hitachi showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dupont De and Hitachi

The main advantage of trading using opposite Dupont De and Hitachi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont De 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 Dupont De Nemours and Hitachi Ltd ADR 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.