Correlation Between Anhui Conch and Daikin IndustriesLtd

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

By analyzing existing cross correlation between Anhui Conch Cement and Daikin IndustriesLtd, you can compare the effects of market volatilities on Anhui Conch and Daikin IndustriesLtd 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 Anhui Conch with a short position of Daikin IndustriesLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anhui Conch and Daikin IndustriesLtd.

Diversification Opportunities for Anhui Conch and Daikin IndustriesLtd

0.8

Correlation Coefficient

Anhui Conch  Daikin IndustriesLtd

Very poor diversification

The 3 months correlation between Anhui and Daikin is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Conch Cement and Daikin IndustriesLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daikin IndustriesLtd and Anhui Conch 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 Anhui Conch Cement are associated (or correlated) with Daikin IndustriesLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daikin IndustriesLtd has no effect on the direction of Anhui Conch i.e., Anhui Conch and Daikin IndustriesLtd go up and down completely randomly.

Pair Corralation between Anhui Conch and Daikin IndustriesLtd

Assuming the 90 days horizon Anhui Conch Cement is expected to under-perform the Daikin IndustriesLtd. In addition to that, Anhui Conch is 2.3 times more volatile than Daikin IndustriesLtd. It trades about -0.06 of its total potential returns per unit of risk. Daikin IndustriesLtd is currently generating about -0.11 per unit of volatility. If you would invest  11,230  in Daikin IndustriesLtd on September 23, 2024 and sell it today you would lose (305.00) from holding Daikin IndustriesLtd or give up 2.72% of portfolio value over 90 days.

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

Anhui Conch Cement  vs.  Daikin IndustriesLtd

Anhui Conch Cement

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Conch Cement are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Anhui Conch reported solid returns over the last few months and may actually be approaching a breakup point.

Daikin IndustriesLtd

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Daikin IndustriesLtd are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Daikin IndustriesLtd reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Anhui Conch and Daikin IndustriesLtd

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

The idea behind Anhui Conch Cement and Daikin IndustriesLtd 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.