Correlation Between Daito Trust and Pan Pacific

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

By analyzing existing cross correlation between Daito Trust Construction and Pan Pacific International, you can compare the effects of market volatilities on Daito Trust and Pan Pacific 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 Daito Trust with a short position of Pan Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daito Trust and Pan Pacific.

Diversification Opportunities for Daito Trust and Pan Pacific

0.31

Correlation Coefficient

Daito Trust  Pan Pacific

Weak diversification

The 3 months correlation between Daito and Pan is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Daito Trust Construction and Pan Pacific International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pan Pacific International and Daito Trust 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 Daito Trust Construction are associated (or correlated) with Pan Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pan Pacific International has no effect on the direction of Daito Trust i.e., Daito Trust and Pan Pacific go up and down completely randomly.

Pair Corralation between Daito Trust and Pan Pacific

Assuming the 90 days horizon Daito Trust is expected to generate 6.14 times less return on investment than Pan Pacific. But when comparing it to its historical volatility, Daito Trust Construction is 3.73 times less risky than Pan Pacific. It trades about 0.06 of its potential returns per unit of risk. Pan Pacific International is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,444  in Pan Pacific International on October 4, 2024 and sell it today you would earn a total of  1,136  from holding Pan Pacific International or generate 78.67% return on investment over 90 days.

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

Daito Trust Construction  vs.  Pan Pacific International

Daito Trust Construction

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pan Pacific International

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pan Pacific International are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Pan Pacific reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Daito Trust and Pan Pacific

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

The idea behind Daito Trust Construction and Pan Pacific International 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 Global Correlations module to find global opportunities by holding instruments from different markets.