Correlation Between Daikin IndustriesLtd and Lennox International

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

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

Diversification Opportunities for Daikin IndustriesLtd and Lennox International

-0.59

Correlation Coefficient

Daikin IndustriesLtd  Lennox International

Excellent diversification

The 3 months correlation between Daikin and Lennox is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Daikin IndustriesLtd and Lennox International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennox International 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 Lennox International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lennox International has no effect on the direction of Daikin IndustriesLtd i.e., Daikin IndustriesLtd and Lennox International go up and down completely randomly.

Pair Corralation between Daikin IndustriesLtd and Lennox International

Assuming the 90 days horizon Daikin IndustriesLtd is expected to under-perform the Lennox International. In addition to that, Daikin IndustriesLtd is 2.58 times more volatile than Lennox International. It trades about -0.05 of its total potential returns per unit of risk. Lennox International is currently generating about 0.08 per unit of volatility. If you would invest  59,437  in Lennox International on September 22, 2024 and sell it today you would earn a total of  3,391  from holding Lennox International or generate 5.71% 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.  Lennox International

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

Lennox International

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lennox International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward indicators, Lennox International is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Daikin IndustriesLtd and Lennox International

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

The idea behind Daikin IndustriesLtd and Lennox International 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.