Correlation Between Daito Trust and Whitehaven Coal

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

Diversification Opportunities for Daito Trust and Whitehaven Coal

-0.3

Correlation Coefficient

Daito Trust  Whitehaven Coal

Very good diversification

The 3 months correlation between Daito and Whitehaven is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Daito Trust Construction and Whitehaven Coal Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whitehaven Coal 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 Whitehaven Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whitehaven Coal has no effect on the direction of Daito Trust i.e., Daito Trust and Whitehaven Coal go up and down completely randomly.

Pair Corralation between Daito Trust and Whitehaven Coal

Assuming the 90 days horizon Daito Trust Construction is expected to generate 0.6 times more return on investment than Whitehaven Coal. However, Daito Trust Construction is 1.68 times less risky than Whitehaven Coal. It trades about 0.02 of its potential returns per unit of risk. Whitehaven Coal Limited is currently generating about -0.01 per unit of risk. If you would invest  9,650  in Daito Trust Construction on October 11, 2024 and sell it today you would earn a total of  850.00  from holding Daito Trust Construction or generate 8.81% return on investment over 90 days.

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

Daito Trust Construction  vs.  Whitehaven Coal Limited

Daito Trust Construction

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Daito Trust Construction are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Whitehaven Coal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Whitehaven Coal Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Daito Trust and Whitehaven Coal

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

The idea behind Daito Trust Construction and Whitehaven Coal Limited 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.