Correlation Between Daiwa House and Daiwa Securities

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

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

Diversification Opportunities for Daiwa House and Daiwa Securities

0.76

Correlation Coefficient

Daiwa House  Daiwa Securities

Poor diversification

The 3 months correlation between Daiwa and Daiwa is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Daiwa House Industry and Daiwa Securities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daiwa Securities and Daiwa House 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 House Industry are associated (or correlated) with Daiwa Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daiwa Securities has no effect on the direction of Daiwa House i.e., Daiwa House and Daiwa Securities go up and down completely randomly.

Pair Corralation between Daiwa House and Daiwa Securities

Assuming the 90 days horizon Daiwa House Industry is expected to generate 0.36 times more return on investment than Daiwa Securities. However, Daiwa House Industry is 2.77 times less risky than Daiwa Securities. It trades about 0.2 of its potential returns per unit of risk. Daiwa Securities Group is currently generating about -0.01 per unit of risk. If you would invest  3,158  in Daiwa House Industry on December 5, 2024 and sell it today you would earn a total of  168.00  from holding Daiwa House Industry or generate 5.32% return on investment over 90 days.

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

Daiwa House Industry  vs.  Daiwa Securities Group

Daiwa House Industry

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Daiwa House Industry are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, Daiwa House is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Daiwa Securities

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Daiwa Securities Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Daiwa House and Daiwa Securities

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

The idea behind Daiwa House Industry and Daiwa Securities Group 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.