Correlation Between Hitachi Construction and SILEON AB

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

Diversification Opportunities for Hitachi Construction and SILEON AB

-0.12

Correlation Coefficient

Hitachi Construction  SILEON AB

Good diversification

The 3 months correlation between Hitachi and SILEON is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi Construction Machinery and SILEON AB ON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SILEON AB ON 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 SILEON AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SILEON AB ON has no effect on the direction of Hitachi Construction i.e., Hitachi Construction and SILEON AB go up and down completely randomly.

Pair Corralation between Hitachi Construction and SILEON AB

Assuming the 90 days horizon Hitachi Construction is expected to generate 4717.06 times less return on investment than SILEON AB. But when comparing it to its historical volatility, Hitachi Construction Machinery is 122.85 times less risky than SILEON AB. It trades about 0.01 of its potential returns per unit of risk. SILEON AB ON is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,625  in SILEON AB ON on September 24, 2024 and sell it today you would lose (1,573) from holding SILEON AB ON or give up 96.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Hitachi Construction Machinery  vs.  SILEON AB ON

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.

SILEON AB ON

Risk-Adjusted Performance

33 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in SILEON AB ON are ranked lower than 33 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, SILEON AB reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hitachi Construction and SILEON AB

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

The idea behind Hitachi Construction Machinery and SILEON AB ON 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.