Correlation Between Hitachi Construction and Varta AG

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

Diversification Opportunities for Hitachi Construction and Varta AG

0.0

Correlation Coefficient

Hitachi Construction  Varta AG

Pay attention - limited upside

The 3 months correlation between Hitachi and Varta is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi Construction Machinery and Varta AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Varta AG 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 Varta AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Varta AG has no effect on the direction of Hitachi Construction i.e., Hitachi Construction and Varta AG go up and down completely randomly.

Pair Corralation between Hitachi Construction and Varta AG

If you would invest  2,040  in Hitachi Construction Machinery on December 22, 2024 and sell it today you would earn a total of  560.00  from holding Hitachi Construction Machinery or generate 27.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Hitachi Construction Machinery  vs.  Varta AG

Hitachi Construction

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hitachi Construction Machinery are ranked lower than 16 (%) 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.

Varta AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days Varta AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Varta AG is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Hitachi Construction and Varta AG

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

The idea behind Hitachi Construction Machinery and Varta AG 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.