Correlation Between Hitachi Construction and Jabil

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

Diversification Opportunities for Hitachi Construction and Jabil

0.58

Correlation Coefficient

Hitachi Construction  Jabil

Very weak diversification

The 3 months correlation between Hitachi and Jabil is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi Construction Machinery and Jabil Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jabil Inc 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 Jabil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jabil Inc has no effect on the direction of Hitachi Construction i.e., Hitachi Construction and Jabil go up and down completely randomly.

Pair Corralation between Hitachi Construction and Jabil

Assuming the 90 days horizon Hitachi Construction is expected to generate 2.11 times less return on investment than Jabil. But when comparing it to its historical volatility, Hitachi Construction Machinery is 1.46 times less risky than Jabil. It trades about 0.26 of its potential returns per unit of risk. Jabil Inc is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  14,035  in Jabil Inc on October 27, 2024 and sell it today you would earn a total of  2,370  from holding Jabil Inc or generate 16.89% return on investment over 90 days.

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

Hitachi Construction Machinery  vs.  Jabil Inc

Hitachi Construction

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hitachi Construction Machinery are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Hitachi Construction reported solid returns over the last few months and may actually be approaching a breakup point.

Jabil Inc

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Jabil Inc are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Jabil reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hitachi Construction and Jabil

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

The idea behind Hitachi Construction Machinery and Jabil Inc 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.