Correlation Between Daiwa House and Wharf Holdings

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

Diversification Opportunities for Daiwa House and Wharf Holdings

-0.59

Correlation Coefficient

Daiwa House  Wharf Holdings

Excellent diversification

The 3 months correlation between Daiwa and Wharf is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Daiwa House Industry and Wharf Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wharf Holdings 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 Wharf Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wharf Holdings has no effect on the direction of Daiwa House i.e., Daiwa House and Wharf Holdings go up and down completely randomly.

Pair Corralation between Daiwa House and Wharf Holdings

Assuming the 90 days horizon Daiwa House Industry is expected to generate 0.33 times more return on investment than Wharf Holdings. However, Daiwa House Industry is 3.04 times less risky than Wharf Holdings. It trades about 0.13 of its potential returns per unit of risk. Wharf Holdings is currently generating about -0.05 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  310.00  from holding Daiwa House Industry or generate 10.08% return on investment over 90 days.

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

Daiwa House Industry  vs.  Wharf Holdings

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 9 (%) 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.

Wharf Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wharf Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental 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 Daiwa House and Wharf Holdings

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

The idea behind Daiwa House Industry and Wharf Holdings 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.