Correlation Between Henderson Land and Hitachi Construction

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

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

Diversification Opportunities for Henderson Land and Hitachi Construction

-0.52

Correlation Coefficient

Henderson Land  Hitachi Construction

Excellent diversification

The 3 months correlation between Henderson and Hitachi is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Henderson Land Development and Hitachi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Construction and Henderson Land 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 Henderson Land Development are associated (or correlated) with Hitachi Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hitachi Construction has no effect on the direction of Henderson Land i.e., Henderson Land and Hitachi Construction go up and down completely randomly.

Pair Corralation between Henderson Land and Hitachi Construction

Assuming the 90 days horizon Henderson Land Development is expected to under-perform the Hitachi Construction. But the stock apears to be less risky and, when comparing its historical volatility, Henderson Land Development is 1.06 times less risky than Hitachi Construction. The stock trades about -0.08 of its potential returns per unit of risk. The Hitachi Construction Machinery is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,080  in Hitachi Construction Machinery on December 25, 2024 and sell it today you would earn a total of  520.00  from holding Hitachi Construction Machinery or generate 25.0% return on investment over 90 days.

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

Henderson Land Development  vs.  Hitachi Construction Machinery

Henderson Land Devel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Henderson Land Development 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.

Hitachi Construction

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hitachi Construction Machinery are ranked lower than 15 (%) 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.

Pair Trading with Henderson Land and Hitachi Construction

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

The idea behind Henderson Land Development and Hitachi Construction Machinery 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 CEOs Directory module to screen CEOs from public companies around the world.