Correlation Between Hitachi Construction and CN ALUMINUM

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

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

Diversification Opportunities for Hitachi Construction and CN ALUMINUM

-0.51

Correlation Coefficient

Hitachi Construction  CN ALUMINUM

Excellent diversification

The 3 months correlation between Hitachi and 4AI is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi Construction Machinery and CN ALUMINUM INT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CN ALUMINUM INT and Hitachi Construction 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 Hitachi Construction Machinery are associated (or correlated) with CN ALUMINUM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CN ALUMINUM INT has no effect on the direction of Hitachi Construction i.e., Hitachi Construction and CN ALUMINUM go up and down completely randomly.

Pair Corralation between Hitachi Construction and CN ALUMINUM

Assuming the 90 days horizon Hitachi Construction Machinery is expected to under-perform the CN ALUMINUM. But the stock apears to be less risky and, when comparing its historical volatility, Hitachi Construction Machinery is 2.06 times less risky than CN ALUMINUM. The stock trades about -0.01 of its potential returns per unit of risk. The CN ALUMINUM INT is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  20.00  in CN ALUMINUM INT on April 24, 2025 and sell it today you would earn a total of  7.00  from holding CN ALUMINUM INT or generate 35.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Hitachi Construction Machinery  vs.  CN ALUMINUM INT

Hitachi Construction

Risk-Adjusted Performance

Very Weak

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

CN ALUMINUM INT

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CN ALUMINUM INT are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile forward indicators, CN ALUMINUM exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hitachi Construction and CN ALUMINUM

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

The idea behind Hitachi Construction Machinery and CN ALUMINUM INT 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 Transaction History module to view history of all your transactions and understand their impact on performance.