Correlation Between Carlisle Companies and Daikin IndustriesLtd

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

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

Diversification Opportunities for Carlisle Companies and Daikin IndustriesLtd

0.69

Correlation Coefficient

Carlisle Companies  Daikin IndustriesLtd

Poor diversification

The 3 months correlation between Carlisle and Daikin is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Carlisle Companies Incorporate and Daikin IndustriesLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daikin IndustriesLtd and Carlisle Companies 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 Carlisle Companies Incorporated 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 Carlisle Companies i.e., Carlisle Companies and Daikin IndustriesLtd go up and down completely randomly.

Pair Corralation between Carlisle Companies and Daikin IndustriesLtd

Considering the 90-day investment horizon Carlisle Companies Incorporated is expected to under-perform the Daikin IndustriesLtd. But the stock apears to be less risky and, when comparing its historical volatility, Carlisle Companies Incorporated is 3.84 times less risky than Daikin IndustriesLtd. The stock trades about -0.16 of its potential returns per unit of risk. The Daikin IndustriesLtd is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  10,725  in Daikin IndustriesLtd on December 10, 2024 and sell it today you would earn a total of  1,372  from holding Daikin IndustriesLtd or generate 12.79% return on investment over 90 days.

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

Carlisle Companies Incorporate  vs.  Daikin IndustriesLtd

Carlisle Companies

Risk-Adjusted Performance

Very Weak

Over the last 90 days Carlisle Companies Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Daikin IndustriesLtd

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Daikin IndustriesLtd are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent essential indicators, Daikin IndustriesLtd may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Carlisle Companies and Daikin IndustriesLtd

The main advantage of trading using opposite Carlisle Companies and Daikin IndustriesLtd positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carlisle Companies 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 Carlisle Companies Incorporated 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.