Correlation Between Hitachi Construction and Sibanye Stillwater

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

Diversification Opportunities for Hitachi Construction and Sibanye Stillwater

-0.2

Correlation Coefficient

Hitachi Construction  Sibanye Stillwater

Good diversification

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

Pair Corralation between Hitachi Construction and Sibanye Stillwater

Assuming the 90 days horizon Hitachi Construction Machinery is expected to generate 0.45 times more return on investment than Sibanye Stillwater. However, Hitachi Construction Machinery is 2.22 times less risky than Sibanye Stillwater. It trades about 0.06 of its potential returns per unit of risk. Sibanye Stillwater Limited is currently generating about -0.14 per unit of risk. If you would invest  2,020  in Hitachi Construction Machinery on October 6, 2024 and sell it today you would earn a total of  80.00  from holding Hitachi Construction Machinery or generate 3.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.5%
Values	Daily Returns

Hitachi Construction Machinery  vs.  Sibanye Stillwater Limited

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Sibanye Stillwater

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sibanye Stillwater Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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 Hitachi Construction and Sibanye Stillwater

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

The idea behind Hitachi Construction Machinery and Sibanye Stillwater Limited 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.