Correlation Between Varta AG and Hitachi Construction

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

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

Diversification Opportunities for Varta AG and Hitachi Construction

0.0

Correlation Coefficient

Varta AG  Hitachi Construction

Pay attention - limited upside

The 3 months correlation between Varta and Hitachi is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Varta AG and Hitachi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Construction and Varta AG 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 Varta AG 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 Varta AG i.e., Varta AG and Hitachi Construction go up and down completely randomly.

Pair Corralation between Varta AG and Hitachi Construction

If you would invest  2,040  in Hitachi Construction Machinery on December 22, 2024 and sell it today you would earn a total of  640.00  from holding Hitachi Construction Machinery or generate 31.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.64%
Values	Daily Returns

Varta AG  vs.  Hitachi Construction Machinery

Varta AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days Varta AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Varta AG is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Hitachi Construction

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hitachi Construction Machinery are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hitachi Construction reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Varta AG and Hitachi Construction

The main advantage of trading using opposite Varta AG and Hitachi Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Varta AG 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 Varta AG 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.