Correlation Between Hitachi Construction and J+J SNACK

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

Diversification Opportunities for Hitachi Construction and J+J SNACK

0.01

Correlation Coefficient

Hitachi Construction  J+J SNACK

Significant diversification

The 3 months correlation between Hitachi and J+J is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi Construction Machinery and JJ SNACK FOODS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JJ SNACK FOODS 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 J+J SNACK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JJ SNACK FOODS has no effect on the direction of Hitachi Construction i.e., Hitachi Construction and J+J SNACK go up and down completely randomly.

Pair Corralation between Hitachi Construction and J+J SNACK

Assuming the 90 days horizon Hitachi Construction is expected to generate 2.64 times less return on investment than J+J SNACK. In addition to that, Hitachi Construction is 1.59 times more volatile than JJ SNACK FOODS. It trades about 0.01 of its total potential returns per unit of risk. JJ SNACK FOODS is currently generating about 0.03 per unit of volatility. If you would invest  13,645  in JJ SNACK FOODS on September 26, 2024 and sell it today you would earn a total of  2,155  from holding JJ SNACK FOODS or generate 15.79% return on investment over 90 days.

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

Hitachi Construction Machinery  vs.  JJ SNACK FOODS

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 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.

JJ SNACK FOODS

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in JJ SNACK FOODS are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, J+J SNACK is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Hitachi Construction and J+J SNACK

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

The idea behind Hitachi Construction Machinery and JJ SNACK FOODS 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.