Correlation Between Daikin IndustriesLtd and Gibraltar Industries

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

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

Diversification Opportunities for Daikin IndustriesLtd and Gibraltar Industries

0.1

Correlation Coefficient

Daikin IndustriesLtd  Gibraltar Industries

Average diversification

The 3 months correlation between Daikin and Gibraltar is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Daikin IndustriesLtd and Gibraltar Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gibraltar Industries 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 Gibraltar Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gibraltar Industries has no effect on the direction of Daikin IndustriesLtd i.e., Daikin IndustriesLtd and Gibraltar Industries go up and down completely randomly.

Pair Corralation between Daikin IndustriesLtd and Gibraltar Industries

Assuming the 90 days horizon Daikin IndustriesLtd is expected to under-perform the Gibraltar Industries. In addition to that, Daikin IndustriesLtd is 2.43 times more volatile than Gibraltar Industries. It trades about -0.05 of its total potential returns per unit of risk. Gibraltar Industries is currently generating about -0.1 per unit of volatility. If you would invest  6,613  in Gibraltar Industries on September 21, 2024 and sell it today you would lose (554.00) from holding Gibraltar Industries or give up 8.38% of portfolio value over 90 days.

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

Daikin IndustriesLtd  vs.  Gibraltar Industries

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.

Gibraltar Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gibraltar Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Daikin IndustriesLtd and Gibraltar Industries

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

The idea behind Daikin IndustriesLtd and Gibraltar Industries 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.