Correlation Between Jardine Matheson and Hitachi

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

By analyzing existing cross correlation between Jardine Matheson Holdings and Hitachi Ltd ADR, you can compare the effects of market volatilities on Jardine Matheson and Hitachi 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 Jardine Matheson with a short position of Hitachi. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jardine Matheson and Hitachi.

Diversification Opportunities for Jardine Matheson and Hitachi

-0.13

Correlation Coefficient

Jardine Matheson  Hitachi

Good diversification

The 3 months correlation between Jardine and Hitachi is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Jardine Matheson Holdings and Hitachi Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Ltd ADR and Jardine Matheson 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 Jardine Matheson Holdings are associated (or correlated) with Hitachi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hitachi Ltd ADR has no effect on the direction of Jardine Matheson i.e., Jardine Matheson and Hitachi go up and down completely randomly.

Pair Corralation between Jardine Matheson and Hitachi

Assuming the 90 days horizon Jardine Matheson is expected to generate 9.43 times less return on investment than Hitachi. But when comparing it to its historical volatility, Jardine Matheson Holdings is 11.52 times less risky than Hitachi. It trades about 0.07 of its potential returns per unit of risk. Hitachi Ltd ADR is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,504  in Hitachi Ltd ADR on December 30, 2024 and sell it today you would lose (108.00) from holding Hitachi Ltd ADR or give up 4.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Jardine Matheson Holdings  vs.  Hitachi Ltd ADR

Jardine Matheson Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Jardine Matheson Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Jardine Matheson is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Jardine Matheson and Hitachi

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

The idea behind Jardine Matheson Holdings and Hitachi Ltd ADR 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.

Check out your portfolio center.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.