Correlation Between Daikin IndustriesLtd and SGS SA

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

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

Diversification Opportunities for Daikin IndustriesLtd and SGS SA

0.58

Correlation Coefficient

Daikin IndustriesLtd  SGS SA

Very weak diversification

The 3 months correlation between Daikin and SGS is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Daikin IndustriesLtd and SGS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGS SA 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 SGS SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGS SA has no effect on the direction of Daikin IndustriesLtd i.e., Daikin IndustriesLtd and SGS SA go up and down completely randomly.

Pair Corralation between Daikin IndustriesLtd and SGS SA

Assuming the 90 days horizon Daikin IndustriesLtd is expected to generate 3.13 times more return on investment than SGS SA. However, Daikin IndustriesLtd is 3.13 times more volatile than SGS SA. It trades about 0.01 of its potential returns per unit of risk. SGS SA is currently generating about -0.02 per unit of risk. If you would invest  11,830  in Daikin IndustriesLtd on October 6, 2024 and sell it today you would lose (39.00) from holding Daikin IndustriesLtd or give up 0.33% of portfolio value over 90 days.

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

Daikin IndustriesLtd  vs.  SGS SA

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 inconsistent performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

SGS SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SGS SA 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 strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Daikin IndustriesLtd and SGS SA

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

The idea behind Daikin IndustriesLtd and SGS SA 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.