Correlation Between Mount Gibson and Hitachi

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

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

Diversification Opportunities for Mount Gibson and Hitachi

0.31

Correlation Coefficient

Mount Gibson  Hitachi

Weak diversification

The 3 months correlation between Mount and Hitachi is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Mount Gibson Iron and Hitachi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi and Mount Gibson 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 Mount Gibson Iron 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 Mount Gibson i.e., Mount Gibson and Hitachi go up and down completely randomly.

Pair Corralation between Mount Gibson and Hitachi

Assuming the 90 days horizon Mount Gibson Iron is expected to under-perform the Hitachi. In addition to that, Mount Gibson is 2.44 times more volatile than Hitachi. It trades about -0.01 of its total potential returns per unit of risk. Hitachi is currently generating about 0.09 per unit of volatility. If you would invest  1,412  in Hitachi on October 24, 2024 and sell it today you would earn a total of  887.00  from holding Hitachi or generate 62.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Mount Gibson Iron  vs.  Hitachi

Mount Gibson Iron

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mount Gibson Iron are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Mount Gibson is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Hitachi

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Mount Gibson and Hitachi

The main advantage of trading using opposite Mount Gibson and Hitachi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mount Gibson 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 Mount Gibson Iron 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.