Correlation Between Butterfly Network and Daikin IndustriesLtd

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

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

Diversification Opportunities for Butterfly Network and Daikin IndustriesLtd

-0.52

Correlation Coefficient

Butterfly Network  Daikin IndustriesLtd

Excellent diversification

The 3 months correlation between Butterfly and Daikin is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Butterfly Network and Daikin IndustriesLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daikin IndustriesLtd and Butterfly Network 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 Butterfly Network 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 Butterfly Network i.e., Butterfly Network and Daikin IndustriesLtd go up and down completely randomly.

Pair Corralation between Butterfly Network and Daikin IndustriesLtd

Given the investment horizon of 90 days Butterfly Network is expected to generate 2.01 times more return on investment than Daikin IndustriesLtd. However, Butterfly Network is 2.01 times more volatile than Daikin IndustriesLtd. It trades about 0.04 of its potential returns per unit of risk. Daikin IndustriesLtd is currently generating about 0.0 per unit of risk. If you would invest  246.00  in Butterfly Network on September 20, 2024 and sell it today you would earn a total of  51.00  from holding Butterfly Network or generate 20.73% return on investment over 90 days.

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

Butterfly Network  vs.  Daikin IndustriesLtd

Butterfly Network

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Butterfly Network are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Butterfly Network showed solid returns over the last few months and may actually be approaching a breakup point.

Daikin IndustriesLtd

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Butterfly Network and Daikin IndustriesLtd

The main advantage of trading using opposite Butterfly Network and Daikin IndustriesLtd positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Butterfly Network 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 Butterfly Network 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.