Correlation Between Daito Trust and Monotaro

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

By analyzing existing cross correlation between Daito Trust Construction and Monotaro Co, you can compare the effects of market volatilities on Daito Trust and Monotaro 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 Daito Trust with a short position of Monotaro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daito Trust and Monotaro.

Diversification Opportunities for Daito Trust and Monotaro

0.64

Correlation Coefficient

Daito Trust  Monotaro

Poor diversification

The 3 months correlation between Daito and Monotaro is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Daito Trust Construction and Monotaro Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monotaro and Daito Trust 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 Daito Trust Construction are associated (or correlated) with Monotaro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monotaro has no effect on the direction of Daito Trust i.e., Daito Trust and Monotaro go up and down completely randomly.

Pair Corralation between Daito Trust and Monotaro

Assuming the 90 days horizon Daito Trust is expected to generate 15.3 times less return on investment than Monotaro. In addition to that, Daito Trust is 1.16 times more volatile than Monotaro Co. It trades about 0.0 of its total potential returns per unit of risk. Monotaro Co is currently generating about 0.06 per unit of volatility. If you would invest  1,350  in Monotaro Co on October 26, 2024 and sell it today you would earn a total of  244.00  from holding Monotaro Co or generate 18.07% return on investment over 90 days.

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

Daito Trust Construction  vs.  Monotaro Co

Daito Trust Construction

Risk-Adjusted Performance

0 of 100

Very Weak

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

Monotaro

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Monotaro Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Monotaro may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Daito Trust and Monotaro

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

The idea behind Daito Trust Construction and Monotaro Co 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 Anywhere module to track or share privately all of your investments from the convenience of any device.