Correlation Between Hitachi Construction and Identiv

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

Diversification Opportunities for Hitachi Construction and Identiv

-0.68

Correlation Coefficient

Hitachi Construction  Identiv

Excellent diversification

The 3 months correlation between Hitachi and Identiv is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi Construction Machinery and Identiv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Identiv 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 Identiv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Identiv has no effect on the direction of Hitachi Construction i.e., Hitachi Construction and Identiv go up and down completely randomly.

Pair Corralation between Hitachi Construction and Identiv

Assuming the 90 days horizon Hitachi Construction Machinery is expected to generate 0.54 times more return on investment than Identiv. However, Hitachi Construction Machinery is 1.84 times less risky than Identiv. It trades about 0.15 of its potential returns per unit of risk. Identiv is currently generating about -0.05 per unit of risk. If you would invest  2,005  in Hitachi Construction Machinery on December 30, 2024 and sell it today you would earn a total of  395.00  from holding Hitachi Construction Machinery or generate 19.7% return on investment over 90 days.

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

Hitachi Construction Machinery  vs.  Identiv

Hitachi Construction

Risk-Adjusted Performance

Good

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

Identiv

Risk-Adjusted Performance

Very Weak

Over the last 90 days Identiv 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 Identiv

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

The idea behind Hitachi Construction Machinery and Identiv 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.