Correlation Between Hitachi and Alliance Global

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

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

Diversification Opportunities for Hitachi and Alliance Global

-0.28

Correlation Coefficient

Hitachi  Alliance Global

Very good diversification

The 3 months correlation between Hitachi and Alliance is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi Ltd ADR and Alliance Global Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Global Group 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 Ltd ADR are associated (or correlated) with Alliance Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Global Group has no effect on the direction of Hitachi i.e., Hitachi and Alliance Global go up and down completely randomly.

Pair Corralation between Hitachi and Alliance Global

Assuming the 90 days horizon Hitachi Ltd ADR is expected to generate 4.04 times more return on investment than Alliance Global. However, Hitachi is 4.04 times more volatile than Alliance Global Group. It trades about 0.05 of its potential returns per unit of risk. Alliance Global Group is currently generating about -0.06 per unit of risk. If you would invest  2,632  in Hitachi Ltd ADR on December 2, 2024 and sell it today you would lose (116.00) from holding Hitachi Ltd ADR or give up 4.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Hitachi Ltd ADR  vs.  Alliance Global Group

Hitachi Ltd ADR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hitachi Ltd ADR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile forward indicators, Hitachi showed solid returns over the last few months and may actually be approaching a breakup point.

Alliance Global Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alliance Global Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Hitachi and Alliance Global

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

The idea behind Hitachi Ltd ADR and Alliance Global Group 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.