Correlation Between Daikin Industries and Daikin IndustriesLtd

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

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

Diversification Opportunities for Daikin Industries and Daikin IndustriesLtd

0.71

Correlation Coefficient

Daikin Industries  Daikin IndustriesLtd

Poor diversification

The 3 months correlation between Daikin and Daikin is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Daikin Industries Ltd and Daikin IndustriesLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daikin IndustriesLtd and Daikin Industries 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 Industries Ltd are associated (or correlated) with Daikin IndustriesLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daikin IndustriesLtd has no effect on the direction of Daikin Industries i.e., Daikin Industries and Daikin IndustriesLtd go up and down completely randomly.

Pair Corralation between Daikin Industries and Daikin IndustriesLtd

Assuming the 90 days horizon Daikin Industries Ltd is expected to generate 0.29 times more return on investment than Daikin IndustriesLtd. However, Daikin Industries Ltd is 3.49 times less risky than Daikin IndustriesLtd. It trades about -0.09 of its potential returns per unit of risk. Daikin IndustriesLtd is currently generating about -0.16 per unit of risk. If you would invest  1,174  in Daikin Industries Ltd on September 20, 2024 and sell it today you would lose (31.00) from holding Daikin Industries Ltd or give up 2.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Daikin Industries Ltd  vs.  Daikin IndustriesLtd

Daikin Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daikin Industries Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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.

Pair Trading with Daikin Industries and Daikin IndustriesLtd

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

The idea behind Daikin Industries Ltd and Daikin IndustriesLtd 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.