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

0.19

Correlation Coefficient

Dairy Farm  Hitachi

Average diversification

The 3 months correlation between Dairy and Hitachi is 0.19. 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 generate 1.12 times more return on investment than Hitachi. However, Dairy Farm is 1.12 times more volatile than Hitachi. It trades about 0.05 of its potential returns per unit of risk. Hitachi is currently generating about -0.05 per unit of risk. If you would invest  203.00  in Dairy Farm International on December 29, 2024 and sell it today you would earn a total of  15.00  from holding Dairy Farm International or generate 7.39% return on investment over 90 days.

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

Dairy Farm International  vs.  Hitachi

Dairy Farm International

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dairy Farm International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Dairy Farm may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.