Correlation Between Daikin IndustriesLtd and Azek

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

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

Diversification Opportunities for Daikin IndustriesLtd and Azek

-0.48

Correlation Coefficient

Daikin IndustriesLtd  Azek

Very good diversification

The 3 months correlation between Daikin and Azek is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Daikin IndustriesLtd and Azek Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azek Company 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 Azek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azek Company has no effect on the direction of Daikin IndustriesLtd i.e., Daikin IndustriesLtd and Azek go up and down completely randomly.

Pair Corralation between Daikin IndustriesLtd and Azek

Assuming the 90 days horizon Daikin IndustriesLtd is expected to under-perform the Azek. In addition to that, Daikin IndustriesLtd is 2.34 times more volatile than Azek Company. It trades about -0.05 of its total potential returns per unit of risk. Azek Company is currently generating about 0.14 per unit of volatility. If you would invest  4,320  in Azek Company on September 21, 2024 and sell it today you would earn a total of  498.00  from holding Azek Company or generate 11.53% return on investment over 90 days.

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

Daikin IndustriesLtd  vs.  Azek Company

Daikin IndustriesLtd

Risk-Adjusted Performance

0 of 100

Very Weak

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

Azek Company

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Azek Company are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Azek is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Daikin IndustriesLtd and Azek

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

The idea behind Daikin IndustriesLtd and Azek Company 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.