Correlation Between Alphabet and Hitachi Zosen

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

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

Diversification Opportunities for Alphabet and Hitachi Zosen

0.46

Correlation Coefficient

Alphabet  Hitachi Zosen

Very weak diversification

The 3 months correlation between Alphabet and Hitachi is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C and Hitachi Zosen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Zosen and Alphabet 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 Alphabet Inc Class C are associated (or correlated) with Hitachi Zosen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hitachi Zosen has no effect on the direction of Alphabet i.e., Alphabet and Hitachi Zosen go up and down completely randomly.

Pair Corralation between Alphabet and Hitachi Zosen

Given the investment horizon of 90 days Alphabet Inc Class C is expected to under-perform the Hitachi Zosen. But the stock apears to be less risky and, when comparing its historical volatility, Alphabet Inc Class C is 1.19 times less risky than Hitachi Zosen. The stock trades about -0.35 of its potential returns per unit of risk. The Hitachi Zosen is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest  645.00  in Hitachi Zosen on December 4, 2024 and sell it today you would lose (64.00) from holding Hitachi Zosen or give up 9.92% of portfolio value over 90 days.

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

Alphabet Inc Class C  vs.  Hitachi Zosen

Alphabet Class C

Risk-Adjusted Performance

Very Weak

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

Hitachi Zosen

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Alphabet and Hitachi Zosen

The main advantage of trading using opposite Alphabet and Hitachi Zosen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet position performs unexpectedly, Hitachi Zosen 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 Zosen will offset losses from the drop in Hitachi Zosen's long position.

The idea behind Alphabet Inc Class C and Hitachi Zosen 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.