Correlation Between Hitachi and Toshiba

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

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

Diversification Opportunities for Hitachi and Toshiba

0.21

Correlation Coefficient

Hitachi  Toshiba

Modest diversification

The 3 months correlation between Hitachi and Toshiba is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Hitachi Ltd ADR and Toshiba in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toshiba and Hitachi 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 Ltd ADR are associated (or correlated) with Toshiba. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toshiba has no effect on the direction of Hitachi i.e., Hitachi and Toshiba go up and down completely randomly.

Pair Corralation between Hitachi and Toshiba

If you would invest  17,704  in Hitachi Ltd ADR on January 30, 2024 and sell it today you would earn a total of  100.00  from holding Hitachi Ltd ADR or generate 0.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	4.55%
Values	Daily Returns

Hitachi Ltd ADR  vs.  Toshiba

Hitachi Ltd ADR

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hitachi Ltd ADR are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting forward indicators, Hitachi showed solid returns over the last few months and may actually be approaching a breakup point.

Toshiba

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Hitachi and Toshiba

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

The idea behind Hitachi Ltd ADR and Toshiba 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.