Correlation Between DAIKIN INDUSTRUNSPADR and Kingspan Group

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

By analyzing existing cross correlation between DAIKIN INDUSTRUNSPADR and Kingspan Group plc, you can compare the effects of market volatilities on DAIKIN INDUSTRUNSPADR and Kingspan Group 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 INDUSTRUNSPADR with a short position of Kingspan Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of DAIKIN INDUSTRUNSPADR and Kingspan Group.

Diversification Opportunities for DAIKIN INDUSTRUNSPADR and Kingspan Group

-0.46

Correlation Coefficient

DAIKIN INDUSTRUNSPADR  Kingspan Group

Very good diversification

The 3 months correlation between DAIKIN and Kingspan is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding DAIKIN INDUSTRUNSPADR and Kingspan Group plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kingspan Group plc and DAIKIN INDUSTRUNSPADR 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 INDUSTRUNSPADR are associated (or correlated) with Kingspan Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kingspan Group plc has no effect on the direction of DAIKIN INDUSTRUNSPADR i.e., DAIKIN INDUSTRUNSPADR and Kingspan Group go up and down completely randomly.

Pair Corralation between DAIKIN INDUSTRUNSPADR and Kingspan Group

Assuming the 90 days trading horizon DAIKIN INDUSTRUNSPADR is expected to under-perform the Kingspan Group. But the stock apears to be less risky and, when comparing its historical volatility, DAIKIN INDUSTRUNSPADR is 1.79 times less risky than Kingspan Group. The stock trades about -0.01 of its potential returns per unit of risk. The Kingspan Group plc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  6,920  in Kingspan Group plc on December 21, 2024 and sell it today you would earn a total of  1,385  from holding Kingspan Group plc or generate 20.01% return on investment over 90 days.

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

DAIKIN INDUSTRUNSPADR  vs.  Kingspan Group plc

DAIKIN INDUSTRUNSPADR

Risk-Adjusted Performance

Very Weak

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

Kingspan Group plc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kingspan Group plc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Kingspan Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DAIKIN INDUSTRUNSPADR and Kingspan Group

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

The idea behind DAIKIN INDUSTRUNSPADR and Kingspan Group plc 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.