Correlation Between Hitachi Construction and Textainer Group

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

Diversification Opportunities for Hitachi Construction and Textainer Group

0.05

Correlation Coefficient

Hitachi Construction  Textainer Group

Significant diversification

The 3 months correlation between Hitachi and Textainer is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi Construction Machinery and Textainer Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Textainer Group Holdings 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 Textainer Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Textainer Group Holdings has no effect on the direction of Hitachi Construction i.e., Hitachi Construction and Textainer Group go up and down completely randomly.

Pair Corralation between Hitachi Construction and Textainer Group

Assuming the 90 days horizon Hitachi Construction Machinery is expected to generate 0.76 times more return on investment than Textainer Group. However, Hitachi Construction Machinery is 1.31 times less risky than Textainer Group. It trades about 0.04 of its potential returns per unit of risk. Textainer Group Holdings is currently generating about -0.01 per unit of risk. If you would invest  4,364  in Hitachi Construction Machinery on September 17, 2024 and sell it today you would earn a total of  78.00  from holding Hitachi Construction Machinery or generate 1.79% 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.  Textainer Group Holdings

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. In spite of fairly strong primary indicators, Hitachi Construction is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Textainer Group Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Textainer Group Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Textainer Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hitachi Construction and Textainer Group

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

The idea behind Hitachi Construction Machinery and Textainer Group Holdings 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.