Correlation Between Daito Trust and Thyssenkrupp

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

Diversification Opportunities for Daito Trust and Thyssenkrupp

-0.62

Correlation Coefficient

Daito Trust  Thyssenkrupp

Excellent diversification

The 3 months correlation between Daito and Thyssenkrupp is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Daito Trust Construction and thyssenkrupp AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on thyssenkrupp AG 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 Thyssenkrupp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of thyssenkrupp AG has no effect on the direction of Daito Trust i.e., Daito Trust and Thyssenkrupp go up and down completely randomly.

Pair Corralation between Daito Trust and Thyssenkrupp

Assuming the 90 days horizon Daito Trust Construction is expected to under-perform the Thyssenkrupp. But the stock apears to be less risky and, when comparing its historical volatility, Daito Trust Construction is 3.39 times less risky than Thyssenkrupp. The stock trades about -0.06 of its potential returns per unit of risk. The thyssenkrupp AG is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  378.00  in thyssenkrupp AG on December 2, 2024 and sell it today you would earn a total of  374.00  from holding thyssenkrupp AG or generate 98.94% return on investment over 90 days.

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

Daito Trust Construction  vs.  thyssenkrupp AG

Daito Trust Construction

Risk-Adjusted Performance

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

thyssenkrupp AG

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in thyssenkrupp AG are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Thyssenkrupp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Daito Trust and Thyssenkrupp

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

The idea behind Daito Trust Construction and thyssenkrupp AG 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.

Check out your portfolio center.

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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.