Correlation Between Daikin IndustriesLtd and Masco

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

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

Diversification Opportunities for Daikin IndustriesLtd and Masco

0.47

Correlation Coefficient

Daikin IndustriesLtd  Masco

Very weak diversification

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

Pair Corralation between Daikin IndustriesLtd and Masco

Assuming the 90 days horizon Daikin IndustriesLtd is expected to under-perform the Masco. In addition to that, Daikin IndustriesLtd is 2.3 times more volatile than Masco. It trades about -0.02 of its total potential returns per unit of risk. Masco is currently generating about 0.04 per unit of volatility. If you would invest  6,595  in Masco on September 24, 2024 and sell it today you would earn a total of  844.00  from holding Masco or generate 12.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

Daikin IndustriesLtd  vs.  Masco

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.

Masco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Masco has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Daikin IndustriesLtd and Masco

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

The idea behind Daikin IndustriesLtd and Masco 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.