Correlation Between LABOCANNA and Daiwa House

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

By analyzing existing cross correlation between LABOCANNA SA ZY 10 and Daiwa House Industry, you can compare the effects of market volatilities on LABOCANNA and Daiwa House 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 LABOCANNA with a short position of Daiwa House. Check out your portfolio center. Please also check ongoing floating volatility patterns of LABOCANNA and Daiwa House.

Diversification Opportunities for LABOCANNA and Daiwa House

-0.6

Correlation Coefficient

LABOCANNA  Daiwa House

Excellent diversification

The 3 months correlation between LABOCANNA and Daiwa is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding LABOCANNA SA ZY 10 and Daiwa House Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daiwa House Industry and LABOCANNA 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 LABOCANNA SA ZY 10 are associated (or correlated) with Daiwa House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daiwa House Industry has no effect on the direction of LABOCANNA i.e., LABOCANNA and Daiwa House go up and down completely randomly.

Pair Corralation between LABOCANNA and Daiwa House

Assuming the 90 days horizon LABOCANNA SA ZY 10 is expected to under-perform the Daiwa House. In addition to that, LABOCANNA is 2.03 times more volatile than Daiwa House Industry. It trades about -0.13 of its total potential returns per unit of risk. Daiwa House Industry is currently generating about -0.04 per unit of volatility. If you would invest  2,960  in Daiwa House Industry on October 5, 2024 and sell it today you would lose (40.00) from holding Daiwa House Industry or give up 1.35% of portfolio value over 90 days.

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

LABOCANNA SA ZY 10  vs.  Daiwa House Industry

LABOCANNA SA ZY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LABOCANNA SA ZY 10 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain 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.

Daiwa House Industry

Risk-Adjusted Performance

0 of 100

Insignificant

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

Pair Trading with LABOCANNA and Daiwa House

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

The idea behind LABOCANNA SA ZY 10 and Daiwa House Industry 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.