Correlation Between Dairy Farm and Hitachi

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

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

Diversification Opportunities for Dairy Farm and Hitachi

0.18

Correlation Coefficient

Dairy Farm  Hitachi

Average diversification

The 3 months correlation between Dairy and Hitachi is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International and Hitachi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi and Dairy Farm 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 Dairy Farm International 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 Dairy Farm i.e., Dairy Farm and Hitachi go up and down completely randomly.

Pair Corralation between Dairy Farm and Hitachi

Assuming the 90 days trading horizon Dairy Farm International is expected to under-perform the Hitachi. But the stock apears to be less risky and, when comparing its historical volatility, Dairy Farm International is 1.49 times less risky than Hitachi. The stock trades about -0.23 of its potential returns per unit of risk. The Hitachi is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  2,438  in Hitachi on December 4, 2024 and sell it today you would lose (157.00) from holding Hitachi or give up 6.44% of portfolio value over 90 days.

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

Dairy Farm International  vs.  Hitachi

Dairy Farm International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dairy Farm International 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 April 2025. The current disturbance may also be a sign of long-run up-swing for the company 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 fragile 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 Dairy Farm and Hitachi

The main advantage of trading using opposite Dairy Farm and Hitachi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dairy Farm 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 Dairy Farm International 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.