Correlation Between Daikin IndustriesLtd and NIBE Industrier

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

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

Diversification Opportunities for Daikin IndustriesLtd and NIBE Industrier

0.61

Correlation Coefficient

Daikin IndustriesLtd  NIBE Industrier

Poor diversification

The 3 months correlation between Daikin and NIBE is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Daikin IndustriesLtd and NIBE Industrier AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NIBE Industrier AB 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 NIBE Industrier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NIBE Industrier AB has no effect on the direction of Daikin IndustriesLtd i.e., Daikin IndustriesLtd and NIBE Industrier go up and down completely randomly.

Pair Corralation between Daikin IndustriesLtd and NIBE Industrier

Assuming the 90 days horizon Daikin IndustriesLtd is expected to under-perform the NIBE Industrier. But the pink sheet apears to be less risky and, when comparing its historical volatility, Daikin IndustriesLtd is 2.47 times less risky than NIBE Industrier. The pink sheet trades about -0.18 of its potential returns per unit of risk. The NIBE Industrier AB is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  429.00  in NIBE Industrier AB on September 25, 2024 and sell it today you would earn a total of  148.00  from holding NIBE Industrier AB or generate 34.5% return on investment over 90 days.

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

Daikin IndustriesLtd  vs.  NIBE Industrier AB

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

NIBE Industrier AB

Risk-Adjusted Performance

5 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NIBE Industrier AB are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting fundamental drivers, NIBE Industrier reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Daikin IndustriesLtd and NIBE Industrier

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

The idea behind Daikin IndustriesLtd and NIBE Industrier AB 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.