Correlation Between Daiwa Securities and AGC

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

By analyzing existing cross correlation between Daiwa Securities Group and AGC Inc ADR, you can compare the effects of market volatilities on Daiwa Securities and AGC 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 Daiwa Securities with a short position of AGC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daiwa Securities and AGC.

Diversification Opportunities for Daiwa Securities and AGC

0.57

Correlation Coefficient

Daiwa Securities  AGC

Very weak diversification

The 3 months correlation between Daiwa and AGC is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Daiwa Securities Group and AGC Inc ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGC Inc ADR and Daiwa Securities 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 Daiwa Securities Group are associated (or correlated) with AGC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGC Inc ADR has no effect on the direction of Daiwa Securities i.e., Daiwa Securities and AGC go up and down completely randomly.

Pair Corralation between Daiwa Securities and AGC

Assuming the 90 days horizon Daiwa Securities Group is expected to generate 1.15 times more return on investment than AGC. However, Daiwa Securities is 1.15 times more volatile than AGC Inc ADR. It trades about 0.04 of its potential returns per unit of risk. AGC Inc ADR is currently generating about -0.01 per unit of risk. If you would invest  466.00  in Daiwa Securities Group on October 23, 2024 and sell it today you would earn a total of  210.00  from holding Daiwa Securities Group or generate 45.06% return on investment over 90 days.

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

Daiwa Securities Group  vs.  AGC Inc ADR

Daiwa Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daiwa Securities Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Daiwa Securities is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

AGC Inc ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AGC Inc ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, AGC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Daiwa Securities and AGC

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

The idea behind Daiwa Securities Group and AGC Inc ADR 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.