Correlation Between Hitachi Construction and S A P

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

Diversification Opportunities for Hitachi Construction and S A P

0.57

Correlation Coefficient

Hitachi Construction  S A P

Very weak diversification

The 3 months correlation between Hitachi and SAP is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi Construction Machinery and SAP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SAP SE 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 S A P. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SAP SE has no effect on the direction of Hitachi Construction i.e., Hitachi Construction and S A P go up and down completely randomly.

Pair Corralation between Hitachi Construction and S A P

Assuming the 90 days horizon Hitachi Construction is expected to generate 12.03 times less return on investment than S A P. But when comparing it to its historical volatility, Hitachi Construction Machinery is 1.07 times less risky than S A P. It trades about 0.02 of its potential returns per unit of risk. SAP SE is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  21,985  in SAP SE on April 22, 2025 and sell it today you would earn a total of  4,330  from holding SAP SE or generate 19.7% return on investment over 90 days.

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

Hitachi Construction Machinery  vs.  SAP SE

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.

SAP SE

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SAP SE are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, S A P reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hitachi Construction and S A P

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

The idea behind Hitachi Construction Machinery and SAP SE 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.