Correlation Between Hitachi Construction and KeyCorp

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

Diversification Opportunities for Hitachi Construction and KeyCorp

-0.17

Correlation Coefficient

Hitachi Construction  KeyCorp

Good diversification

The 3 months correlation between Hitachi and KeyCorp is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi Construction Machinery and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp 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 KeyCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KeyCorp has no effect on the direction of Hitachi Construction i.e., Hitachi Construction and KeyCorp go up and down completely randomly.

Pair Corralation between Hitachi Construction and KeyCorp

Assuming the 90 days horizon Hitachi Construction is expected to generate 19.78 times less return on investment than KeyCorp. But when comparing it to its historical volatility, Hitachi Construction Machinery is 1.25 times less risky than KeyCorp. It trades about 0.02 of its potential returns per unit of risk. KeyCorp is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  1,165  in KeyCorp on April 22, 2025 and sell it today you would earn a total of  404.00  from holding KeyCorp or generate 34.68% return on investment over 90 days.

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

Hitachi Construction Machinery  vs.  KeyCorp

Hitachi Construction

Risk-Adjusted Performance

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

KeyCorp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in KeyCorp are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, KeyCorp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hitachi Construction and KeyCorp

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

The idea behind Hitachi Construction Machinery and KeyCorp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.