Correlation Between Daikin IndustriesLtd and Great West

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

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

Diversification Opportunities for Daikin IndustriesLtd and Great West

-0.47

Correlation Coefficient

Daikin IndustriesLtd  Great West

Very good diversification

The 3 months correlation between Daikin and Great is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Daikin IndustriesLtd and Great West Lifeco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great West Lifeco 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 Great West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great West Lifeco has no effect on the direction of Daikin IndustriesLtd i.e., Daikin IndustriesLtd and Great West go up and down completely randomly.

Pair Corralation between Daikin IndustriesLtd and Great West

If you would invest  3,031  in Great West Lifeco on September 19, 2024 and sell it today you would earn a total of  0.00  from holding Great West Lifeco or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	4.76%
Values	Daily Returns

Daikin IndustriesLtd  vs.  Great West Lifeco

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.

Great West Lifeco

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Daikin IndustriesLtd and Great West

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

The idea behind Daikin IndustriesLtd and Great West Lifeco 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.