Correlation Between Hitachi and Volvo AB

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

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

Diversification Opportunities for Hitachi and Volvo AB

0.36

Correlation Coefficient

Hitachi  Volvo AB

Weak diversification

The 3 months correlation between Hitachi and Volvo is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi and Volvo AB ser in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volvo AB ser 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 Volvo AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volvo AB ser has no effect on the direction of Hitachi i.e., Hitachi and Volvo AB go up and down completely randomly.

Pair Corralation between Hitachi and Volvo AB

Assuming the 90 days horizon Hitachi is expected to under-perform the Volvo AB. In addition to that, Hitachi is 2.07 times more volatile than Volvo AB ser. It trades about -0.02 of its total potential returns per unit of risk. Volvo AB ser is currently generating about 0.15 per unit of volatility. If you would invest  2,490  in Volvo AB ser on September 16, 2024 and sell it today you would earn a total of  140.00  from holding Volvo AB ser or generate 5.62% 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.  Volvo AB ser

Hitachi

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hitachi are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward indicators, Hitachi may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Volvo AB ser

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Volvo AB ser are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Volvo AB 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 Volvo AB

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

The idea behind Hitachi and Volvo AB ser 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.