Correlation Between Hitachi Construction and Hyundai

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

Diversification Opportunities for Hitachi Construction and Hyundai

0.03

Correlation Coefficient

Hitachi Construction  Hyundai

Significant diversification

The 3 months correlation between Hitachi and Hyundai is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi Construction Machinery and Hyundai Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hyundai Motor 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 Hyundai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hyundai Motor has no effect on the direction of Hitachi Construction i.e., Hitachi Construction and Hyundai go up and down completely randomly.

Pair Corralation between Hitachi Construction and Hyundai

Assuming the 90 days horizon Hitachi Construction Machinery is expected to generate 0.92 times more return on investment than Hyundai. However, Hitachi Construction Machinery is 1.08 times less risky than Hyundai. It trades about 0.01 of its potential returns per unit of risk. Hyundai Motor is currently generating about -0.03 per unit of risk. If you would invest  2,100  in Hitachi Construction Machinery on October 7, 2024 and sell it today you would earn a total of  0.00  from holding Hitachi Construction Machinery or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.44%
Values	Daily Returns

Hitachi Construction Machinery  vs.  Hyundai Motor

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.

Hyundai Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hyundai Motor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 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 Hyundai

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

The idea behind Hitachi Construction Machinery and Hyundai Motor 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..