Correlation Between Hitachi Construction and AP Møller

Can any of the company-specific risk be diversified away by investing in both Hitachi Construction and AP Møller 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 AP Møller 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 AP Mller , you can compare the effects of market volatilities on Hitachi Construction and AP Møller 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 AP Møller. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hitachi Construction and AP Møller.

Diversification Opportunities for Hitachi Construction and AP Møller

0.36

Correlation Coefficient

Hitachi Construction  AP Møller

Weak diversification

The 3 months correlation between Hitachi and DP4B is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi Construction Machinery and AP Mller in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AP Møller 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 AP Møller. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AP Møller has no effect on the direction of Hitachi Construction i.e., Hitachi Construction and AP Møller go up and down completely randomly.

Pair Corralation between Hitachi Construction and AP Møller

Assuming the 90 days horizon Hitachi Construction is expected to generate 13.18 times less return on investment than AP Møller. But when comparing it to its historical volatility, Hitachi Construction Machinery is 1.57 times less risky than AP Møller. It trades about 0.02 of its potential returns per unit of risk. AP Mller is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  142,950  in AP Mller on April 20, 2025 and sell it today you would earn a total of  29,550  from holding AP Mller or generate 20.67% return on investment over 90 days.

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

Hitachi Construction Machinery  vs.  AP Mller

Hitachi Construction

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hitachi Construction Machinery are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Hitachi Construction is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

AP Møller

Risk-Adjusted Performance

OK

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

Pair Trading with Hitachi Construction and AP Møller

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

The idea behind Hitachi Construction Machinery and AP Mller 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..