Correlation Between Hitachi and Keppel

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

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

Diversification Opportunities for Hitachi and Keppel

0.02

Correlation Coefficient

Hitachi  Keppel

Significant diversification

The 3 months correlation between Hitachi and Keppel is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi and Keppel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keppel Limited 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 Keppel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keppel Limited has no effect on the direction of Hitachi i.e., Hitachi and Keppel go up and down completely randomly.

Pair Corralation between Hitachi and Keppel

Assuming the 90 days horizon Hitachi is expected to generate 1.47 times more return on investment than Keppel. However, Hitachi is 1.47 times more volatile than Keppel Limited. It trades about 0.0 of its potential returns per unit of risk. Keppel Limited is currently generating about -0.01 per unit of risk. If you would invest  2,560  in Hitachi on October 12, 2024 and sell it today you would lose (57.00) from holding Hitachi or give up 2.23% of portfolio value over 90 days.

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

Hitachi  vs.  Keppel Limited

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 forward indicators, Hitachi is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Keppel Limited

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Keppel Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Keppel is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hitachi and Keppel

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

The idea behind Hitachi and Keppel Limited 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.