Correlation Between Daiwa House and Isuzu Motors

Can any of the company-specific risk be diversified away by investing in both Daiwa House and Isuzu Motors 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 Isuzu Motors 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 Isuzu Motors, you can compare the effects of market volatilities on Daiwa House and Isuzu Motors 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 Isuzu Motors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daiwa House and Isuzu Motors.

Diversification Opportunities for Daiwa House and Isuzu Motors

-0.13

Correlation Coefficient

Daiwa House  Isuzu Motors

Good diversification

The 3 months correlation between Daiwa and Isuzu is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Daiwa House Industry and Isuzu Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Isuzu Motors 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 Isuzu Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Isuzu Motors has no effect on the direction of Daiwa House i.e., Daiwa House and Isuzu Motors go up and down completely randomly.

Pair Corralation between Daiwa House and Isuzu Motors

Assuming the 90 days horizon Daiwa House Industry is expected to generate 0.97 times more return on investment than Isuzu Motors. However, Daiwa House Industry is 1.03 times less risky than Isuzu Motors. It trades about 0.13 of its potential returns per unit of risk. Isuzu Motors is currently generating about -0.02 per unit of risk. If you would invest  3,076  in Daiwa House Industry on December 28, 2024 and sell it today you would earn a total of  322.00  from holding Daiwa House Industry or generate 10.47% return on investment over 90 days.

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

Daiwa House Industry  vs.  Isuzu Motors

Daiwa House Industry

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Daiwa House Industry are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical indicators, Daiwa House may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Isuzu Motors

Risk-Adjusted Performance

Very Weak

Over the last 90 days Isuzu Motors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Isuzu Motors 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 Isuzu Motors

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

The idea behind Daiwa House Industry and Isuzu Motors 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.