Correlation Between Hitachi Construction and AEGEAN AIRLINES

Can any of the company-specific risk be diversified away by investing in both Hitachi Construction and AEGEAN AIRLINES 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 AEGEAN AIRLINES 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 AEGEAN AIRLINES, you can compare the effects of market volatilities on Hitachi Construction and AEGEAN AIRLINES 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 AEGEAN AIRLINES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hitachi Construction and AEGEAN AIRLINES.

Diversification Opportunities for Hitachi Construction and AEGEAN AIRLINES

0.25

Correlation Coefficient

Hitachi Construction  AEGEAN AIRLINES

Modest diversification

The 3 months correlation between Hitachi and AEGEAN is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi Construction Machinery and AEGEAN AIRLINES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEGEAN AIRLINES 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 AEGEAN AIRLINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AEGEAN AIRLINES has no effect on the direction of Hitachi Construction i.e., Hitachi Construction and AEGEAN AIRLINES go up and down completely randomly.

Pair Corralation between Hitachi Construction and AEGEAN AIRLINES

Assuming the 90 days horizon Hitachi Construction Machinery is expected to generate 1.05 times more return on investment than AEGEAN AIRLINES. However, Hitachi Construction is 1.05 times more volatile than AEGEAN AIRLINES. It trades about 0.3 of its potential returns per unit of risk. AEGEAN AIRLINES is currently generating about -0.02 per unit of risk. If you would invest  2,040  in Hitachi Construction Machinery on October 23, 2024 and sell it today you would earn a total of  120.00  from holding Hitachi Construction Machinery or generate 5.88% return on investment over 90 days.

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

Hitachi Construction Machinery  vs.  AEGEAN AIRLINES

Hitachi Construction

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hitachi Construction Machinery are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Hitachi Construction is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

AEGEAN AIRLINES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AEGEAN AIRLINES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, AEGEAN AIRLINES is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Hitachi Construction and AEGEAN AIRLINES

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

The idea behind Hitachi Construction Machinery and AEGEAN AIRLINES 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.