Correlation Between Mitsui and Hitachi

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

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

Diversification Opportunities for Mitsui and Hitachi

-0.07

Correlation Coefficient

Mitsui  Hitachi

Good diversification

The 3 months correlation between Mitsui and Hitachi is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Company 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 Mitsui 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 Mitsui Company 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 Mitsui i.e., Mitsui and Hitachi go up and down completely randomly.

Pair Corralation between Mitsui and Hitachi

If you would invest  4,242  in Hitachi Ltd ADR on September 1, 2024 and sell it today you would earn a total of  777.00  from holding Hitachi Ltd ADR or generate 18.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	0.79%
Values	Daily Returns

Mitsui Company  vs.  Hitachi Ltd ADR

Mitsui Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsui Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Mitsui 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

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hitachi Ltd ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile forward indicators, Hitachi may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Mitsui and Hitachi

The main advantage of trading using opposite Mitsui and Hitachi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mitsui 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 Mitsui Company 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.

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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.