Correlation Between OtelloASA and Hitachi

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

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

Diversification Opportunities for OtelloASA and Hitachi

-0.16

Correlation Coefficient

OtelloASA  Hitachi

Good diversification

The 3 months correlation between OtelloASA and Hitachi is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Otello ASA and Hitachi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi and OtelloASA 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 Otello ASA 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 has no effect on the direction of OtelloASA i.e., OtelloASA and Hitachi go up and down completely randomly.

Pair Corralation between OtelloASA and Hitachi

Assuming the 90 days horizon Otello ASA is expected to generate 0.66 times more return on investment than Hitachi. However, Otello ASA is 1.51 times less risky than Hitachi. It trades about 0.13 of its potential returns per unit of risk. Hitachi is currently generating about -0.03 per unit of risk. If you would invest  63.00  in Otello ASA on December 28, 2024 and sell it today you would earn a total of  9.00  from holding Otello ASA or generate 14.29% return on investment over 90 days.

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

Otello ASA  vs.  Hitachi

Otello ASA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Otello ASA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, OtelloASA reported solid returns over the last few months and may actually be approaching a breakup point.

Hitachi

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hitachi has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Hitachi is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with OtelloASA and Hitachi

The main advantage of trading using opposite OtelloASA and Hitachi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OtelloASA 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 Otello ASA and Hitachi 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.