Correlation Between Hitachi Construction and JPMorgan Chase

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

Diversification Opportunities for Hitachi Construction and JPMorgan Chase

-0.27

Correlation Coefficient

Hitachi Construction  JPMorgan Chase

Very good diversification

The 3 months correlation between Hitachi and JPMorgan is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi Construction Machinery and JPMorgan Chase Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JPMorgan Chase 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 JPMorgan Chase. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JPMorgan Chase has no effect on the direction of Hitachi Construction i.e., Hitachi Construction and JPMorgan Chase go up and down completely randomly.

Pair Corralation between Hitachi Construction and JPMorgan Chase

Assuming the 90 days horizon Hitachi Construction Machinery is expected to generate 2.08 times more return on investment than JPMorgan Chase. However, Hitachi Construction is 2.08 times more volatile than JPMorgan Chase Co. It trades about -0.06 of its potential returns per unit of risk. JPMorgan Chase Co is currently generating about -0.3 per unit of risk. If you would invest  2,080  in Hitachi Construction Machinery on September 24, 2024 and sell it today you would lose (40.00) from holding Hitachi Construction Machinery or give up 1.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Hitachi Construction Machinery  vs.  JPMorgan Chase Co

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.

JPMorgan Chase

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JPMorgan Chase Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, JPMorgan Chase reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hitachi Construction and JPMorgan Chase

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

The idea behind Hitachi Construction Machinery and JPMorgan Chase Co 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.