Correlation Between LBG MEDIA and Hitachi Construction

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

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

Diversification Opportunities for LBG MEDIA and Hitachi Construction

-0.6

Correlation Coefficient

LBG MEDIA  Hitachi Construction

Excellent diversification

The 3 months correlation between LBG and Hitachi is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding LBG MEDIA PLC and Hitachi Construction Machinery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitachi Construction and LBG MEDIA 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 LBG MEDIA PLC 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 LBG MEDIA i.e., LBG MEDIA and Hitachi Construction go up and down completely randomly.

Pair Corralation between LBG MEDIA and Hitachi Construction

Assuming the 90 days horizon LBG MEDIA PLC is expected to generate 1.98 times more return on investment than Hitachi Construction. However, LBG MEDIA is 1.98 times more volatile than Hitachi Construction Machinery. It trades about 0.04 of its potential returns per unit of risk. Hitachi Construction Machinery is currently generating about 0.02 per unit of risk. If you would invest  106.00  in LBG MEDIA PLC on April 20, 2025 and sell it today you would earn a total of  6.00  from holding LBG MEDIA PLC or generate 5.66% return on investment over 90 days.

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

LBG MEDIA PLC  vs.  Hitachi Construction Machinery

LBG MEDIA PLC

Risk-Adjusted Performance

Insignificant

Over the last 90 days LBG MEDIA PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly weak basic indicators, LBG MEDIA may actually be approaching a critical reversion point that can send shares even higher in August 2025.

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

Pair Trading with LBG MEDIA and Hitachi Construction

The main advantage of trading using opposite LBG MEDIA and Hitachi Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LBG MEDIA 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 LBG MEDIA PLC 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.