Correlation Between IONQ and Hitachi Construction

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

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

Diversification Opportunities for IONQ and Hitachi Construction

-0.58

Correlation Coefficient

IONQ  Hitachi Construction

Excellent diversification

The 3 months correlation between IONQ and Hitachi is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding IONQ Inc and Hitachi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Construction and IONQ 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 IONQ Inc 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 IONQ i.e., IONQ and Hitachi Construction go up and down completely randomly.

Pair Corralation between IONQ and Hitachi Construction

Given the investment horizon of 90 days IONQ Inc is expected to generate 3.43 times more return on investment than Hitachi Construction. However, IONQ is 3.43 times more volatile than Hitachi Construction Machinery. It trades about 0.34 of its potential returns per unit of risk. Hitachi Construction Machinery is currently generating about -0.04 per unit of risk. If you would invest  1,250  in IONQ Inc on September 17, 2024 and sell it today you would earn a total of  2,931  from holding IONQ Inc or generate 234.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.67%
Values	Daily Returns

IONQ Inc  vs.  Hitachi Construction Machinery

IONQ Inc

Risk-Adjusted Performance

26 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IONQ Inc are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, IONQ reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with IONQ and Hitachi Construction

The main advantage of trading using opposite IONQ and Hitachi Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IONQ 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 IONQ Inc 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.