Correlation Between Hitachi and NAGOYA RAILROAD

Can any of the company-specific risk be diversified away by investing in both Hitachi and NAGOYA RAILROAD 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 and NAGOYA RAILROAD into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hitachi and NAGOYA RAILROAD, you can compare the effects of market volatilities on Hitachi and NAGOYA RAILROAD 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 with a short position of NAGOYA RAILROAD. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hitachi and NAGOYA RAILROAD.

Diversification Opportunities for Hitachi and NAGOYA RAILROAD

0.2

Correlation Coefficient

Hitachi  NAGOYA RAILROAD

Modest diversification

The 3 months correlation between Hitachi and NAGOYA is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi and NAGOYA RAILROAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NAGOYA RAILROAD and Hitachi 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 are associated (or correlated) with NAGOYA RAILROAD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NAGOYA RAILROAD has no effect on the direction of Hitachi i.e., Hitachi and NAGOYA RAILROAD go up and down completely randomly.

Pair Corralation between Hitachi and NAGOYA RAILROAD

Assuming the 90 days trading horizon Hitachi is expected to generate 42.15 times less return on investment than NAGOYA RAILROAD. In addition to that, Hitachi is 1.11 times more volatile than NAGOYA RAILROAD. It trades about 0.0 of its total potential returns per unit of risk. NAGOYA RAILROAD is currently generating about 0.04 per unit of volatility. If you would invest  1,030  in NAGOYA RAILROAD on October 8, 2024 and sell it today you would earn a total of  40.00  from holding NAGOYA RAILROAD or generate 3.88% return on investment over 90 days.

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

Hitachi  vs.  NAGOYA RAILROAD

Hitachi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hitachi has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Hitachi is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

NAGOYA RAILROAD

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NAGOYA RAILROAD are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, NAGOYA RAILROAD is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Hitachi and NAGOYA RAILROAD

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

The idea behind Hitachi and NAGOYA RAILROAD 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.