Correlation Between Hitachi Construction and ViacomCBS

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

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

Diversification Opportunities for Hitachi Construction and ViacomCBS

0.2

Correlation Coefficient

Hitachi Construction  ViacomCBS

Modest diversification

The 3 months correlation between Hitachi and ViacomCBS is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi Construction Machinery and ViacomCBS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ViacomCBS and Hitachi Construction 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 Hitachi Construction Machinery are associated (or correlated) with ViacomCBS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ViacomCBS has no effect on the direction of Hitachi Construction i.e., Hitachi Construction and ViacomCBS go up and down completely randomly.

Pair Corralation between Hitachi Construction and ViacomCBS

Assuming the 90 days horizon Hitachi Construction Machinery is expected to under-perform the ViacomCBS. In addition to that, Hitachi Construction is 1.08 times more volatile than ViacomCBS. It trades about -0.02 of its total potential returns per unit of risk. ViacomCBS is currently generating about 0.08 per unit of volatility. If you would invest  1,983  in ViacomCBS on October 9, 2024 and sell it today you would earn a total of  157.00  from holding ViacomCBS or generate 7.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Hitachi Construction Machinery  vs.  ViacomCBS

Hitachi Construction

Risk-Adjusted Performance

0 of 100

Very Weak

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

ViacomCBS

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ViacomCBS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ViacomCBS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Hitachi Construction and ViacomCBS

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

The idea behind Hitachi Construction Machinery and ViacomCBS 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.