Correlation Between Daikin IndustriesLtd and Webster Financial

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

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

Diversification Opportunities for Daikin IndustriesLtd and Webster Financial

0.06

Correlation Coefficient

Daikin IndustriesLtd  Webster Financial

Significant diversification

The 3 months correlation between Daikin and Webster is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Daikin IndustriesLtd and Webster Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Webster Financial and Daikin IndustriesLtd 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 Daikin IndustriesLtd are associated (or correlated) with Webster Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Webster Financial has no effect on the direction of Daikin IndustriesLtd i.e., Daikin IndustriesLtd and Webster Financial go up and down completely randomly.

Pair Corralation between Daikin IndustriesLtd and Webster Financial

Assuming the 90 days horizon Daikin IndustriesLtd is expected to generate 1.52 times more return on investment than Webster Financial. However, Daikin IndustriesLtd is 1.52 times more volatile than Webster Financial. It trades about 0.03 of its potential returns per unit of risk. Webster Financial is currently generating about 0.03 per unit of risk. If you would invest  9,348  in Daikin IndustriesLtd on October 23, 2024 and sell it today you would earn a total of  2,157  from holding Daikin IndustriesLtd or generate 23.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Daikin IndustriesLtd  vs.  Webster Financial

Daikin IndustriesLtd

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Daikin IndustriesLtd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Daikin IndustriesLtd is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Webster Financial

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Daikin IndustriesLtd and Webster Financial

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

The idea behind Daikin IndustriesLtd and Webster Financial 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.