Correlation Between Daikin IndustriesLtd and Lixil Group

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

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

Diversification Opportunities for Daikin IndustriesLtd and Lixil Group

-0.2

Correlation Coefficient

Daikin IndustriesLtd  Lixil Group

Good diversification

The 3 months correlation between Daikin and Lixil is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Daikin IndustriesLtd and Lixil Group Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lixil Group Corp 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 Lixil Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lixil Group Corp has no effect on the direction of Daikin IndustriesLtd i.e., Daikin IndustriesLtd and Lixil Group go up and down completely randomly.

Pair Corralation between Daikin IndustriesLtd and Lixil Group

Assuming the 90 days horizon Daikin IndustriesLtd is expected to generate 3.66 times less return on investment than Lixil Group. In addition to that, Daikin IndustriesLtd is 2.28 times more volatile than Lixil Group Corp. It trades about 0.01 of its total potential returns per unit of risk. Lixil Group Corp is currently generating about 0.09 per unit of volatility. If you would invest  2,186  in Lixil Group Corp on December 27, 2024 and sell it today you would earn a total of  243.00  from holding Lixil Group Corp or generate 11.12% return on investment over 90 days.

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

Daikin IndustriesLtd  vs.  Lixil Group Corp

Daikin IndustriesLtd

Risk-Adjusted Performance

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 recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Lixil Group Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lixil Group Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Lixil Group may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Daikin IndustriesLtd and Lixil Group

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

The idea behind Daikin IndustriesLtd and Lixil Group Corp 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.