Correlation Between Teijin and Hitachi

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

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

Diversification Opportunities for Teijin and Hitachi

0.15

Correlation Coefficient

Teijin  Hitachi

Average diversification

The 3 months correlation between Teijin and Hitachi is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Teijin 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 Teijin 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 Teijin 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 Teijin i.e., Teijin and Hitachi go up and down completely randomly.

Pair Corralation between Teijin and Hitachi

Assuming the 90 days horizon Teijin is expected to generate 0.87 times more return on investment than Hitachi. However, Teijin is 1.15 times less risky than Hitachi. It trades about 0.18 of its potential returns per unit of risk. Hitachi Ltd ADR is currently generating about -0.14 per unit of risk. If you would invest  850.00  in Teijin on December 29, 2024 and sell it today you would earn a total of  61.00  from holding Teijin or generate 7.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Teijin  vs.  Hitachi Ltd ADR

Teijin

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Teijin are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Teijin may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 weak forward indicators, Hitachi showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Teijin and Hitachi

The main advantage of trading using opposite Teijin and Hitachi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teijin 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 Teijin 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 Stocks Directory module to find actively traded stocks across global markets.