Correlation Between Intelligent Living and Daikin IndustriesLtd

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

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

Diversification Opportunities for Intelligent Living and Daikin IndustriesLtd

0.43

Correlation Coefficient

Intelligent Living  Daikin IndustriesLtd

Very weak diversification

The 3 months correlation between Intelligent and Daikin is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Intelligent Living Application and Daikin IndustriesLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daikin IndustriesLtd and Intelligent Living 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 Intelligent Living Application 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 Intelligent Living i.e., Intelligent Living and Daikin IndustriesLtd go up and down completely randomly.

Pair Corralation between Intelligent Living and Daikin IndustriesLtd

Given the investment horizon of 90 days Intelligent Living Application is expected to under-perform the Daikin IndustriesLtd. But the stock apears to be less risky and, when comparing its historical volatility, Intelligent Living Application is 1.31 times less risky than Daikin IndustriesLtd. The stock trades about -0.1 of its potential returns per unit of risk. The Daikin IndustriesLtd is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  12,200  in Daikin IndustriesLtd on September 25, 2024 and sell it today you would lose (1,200) from holding Daikin IndustriesLtd or give up 9.84% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.62%
Values	Daily Returns

Intelligent Living Application  vs.  Daikin IndustriesLtd

Intelligent Living

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intelligent Living Application has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Intelligent Living and Daikin IndustriesLtd

The main advantage of trading using opposite Intelligent Living and Daikin IndustriesLtd positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intelligent Living 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 Intelligent Living Application 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.