Correlation Between Hitachi Construction and Commercial Vehicle

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

Diversification Opportunities for Hitachi Construction and Commercial Vehicle

0.48

Correlation Coefficient

Hitachi Construction  Commercial Vehicle

Very weak diversification

The 3 months correlation between Hitachi and Commercial is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi Construction Machinery and Commercial Vehicle Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commercial Vehicle 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 Commercial Vehicle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commercial Vehicle has no effect on the direction of Hitachi Construction i.e., Hitachi Construction and Commercial Vehicle go up and down completely randomly.

Pair Corralation between Hitachi Construction and Commercial Vehicle

Assuming the 90 days horizon Hitachi Construction Machinery is expected to generate 0.63 times more return on investment than Commercial Vehicle. However, Hitachi Construction Machinery is 1.6 times less risky than Commercial Vehicle. It trades about 0.0 of its potential returns per unit of risk. Commercial Vehicle Group is currently generating about -0.13 per unit of risk. If you would invest  2,120  in Hitachi Construction Machinery on September 4, 2024 and sell it today you would lose (20.00) from holding Hitachi Construction Machinery or give up 0.94% of portfolio value over 90 days.

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

Hitachi Construction Machinery  vs.  Commercial Vehicle Group

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.

Commercial Vehicle

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Commercial Vehicle Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Hitachi Construction and Commercial Vehicle

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

The idea behind Hitachi Construction Machinery and Commercial Vehicle Group 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 Global Correlations module to find global opportunities by holding instruments from different markets.