Correlation Between Berkeley Energy and Sekisui House

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

By analyzing existing cross correlation between Berkeley Energy and Sekisui House Ltd, you can compare the effects of market volatilities on Berkeley Energy and Sekisui 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 Berkeley Energy with a short position of Sekisui House. Check out your portfolio center. Please also check ongoing floating volatility patterns of Berkeley Energy and Sekisui House.

Diversification Opportunities for Berkeley Energy and Sekisui House

-0.35

Correlation Coefficient

Berkeley Energy  Sekisui House

Very good diversification

The 3 months correlation between Berkeley and Sekisui is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Berkeley Energy and Sekisui House Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sekisui House and Berkeley Energy 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 Berkeley Energy are associated (or correlated) with Sekisui House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sekisui House has no effect on the direction of Berkeley Energy i.e., Berkeley Energy and Sekisui House go up and down completely randomly.

Pair Corralation between Berkeley Energy and Sekisui House

Assuming the 90 days horizon Berkeley Energy is expected to generate 4.59 times more return on investment than Sekisui House. However, Berkeley Energy is 4.59 times more volatile than Sekisui House Ltd. It trades about 0.14 of its potential returns per unit of risk. Sekisui House Ltd is currently generating about -0.07 per unit of risk. If you would invest  23.00  in Berkeley Energy on December 30, 2024 and sell it today you would earn a total of  11.00  from holding Berkeley Energy or generate 47.83% return on investment over 90 days.

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

Berkeley Energy  vs.  Sekisui House Ltd

Berkeley Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Berkeley Energy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Berkeley Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Sekisui House

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sekisui House Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Sekisui House is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Berkeley Energy and Sekisui House

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

The idea behind Berkeley Energy and Sekisui House Ltd 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.