Correlation Between Hitachi and Seaboard

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

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

Diversification Opportunities for Hitachi and Seaboard

-0.09

Correlation Coefficient

Hitachi  Seaboard

Good diversification

The 3 months correlation between Hitachi and Seaboard is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi and Seaboard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seaboard 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 Seaboard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seaboard has no effect on the direction of Hitachi i.e., Hitachi and Seaboard go up and down completely randomly.

Pair Corralation between Hitachi and Seaboard

Assuming the 90 days trading horizon Hitachi is expected to generate 1.72 times more return on investment than Seaboard. However, Hitachi is 1.72 times more volatile than Seaboard. It trades about 0.01 of its potential returns per unit of risk. Seaboard is currently generating about -0.22 per unit of risk. If you would invest  2,397  in Hitachi on September 24, 2024 and sell it today you would lose (18.00) from holding Hitachi or give up 0.75% of portfolio value over 90 days.

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

Hitachi  vs.  Seaboard

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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Seaboard

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Seaboard has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Hitachi and Seaboard

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

The idea behind Hitachi and Seaboard 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.