Correlation Between Lixil Group and Masco

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

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

Diversification Opportunities for Lixil Group and Masco

0.33

Correlation Coefficient

Lixil Group  Masco

Weak diversification

The 3 months correlation between Lixil and Masco is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Lixil Group Corp and Masco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masco and Lixil Group 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 Lixil Group Corp are associated (or correlated) with Masco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masco has no effect on the direction of Lixil Group i.e., Lixil Group and Masco go up and down completely randomly.

Pair Corralation between Lixil Group and Masco

Assuming the 90 days horizon Lixil Group is expected to generate 4.61 times less return on investment than Masco. But when comparing it to its historical volatility, Lixil Group Corp is 1.25 times less risky than Masco. It trades about 0.01 of its potential returns per unit of risk. Masco is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  6,759  in Masco on September 22, 2024 and sell it today you would earn a total of  680.00  from holding Masco or generate 10.06% return on investment over 90 days.

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

Lixil Group Corp  vs.  Masco

Lixil Group Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lixil Group Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Masco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Masco has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Lixil Group and Masco

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

The idea behind Lixil Group Corp and Masco 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.