Correlation Between Masco and Lixil Group

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

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

Diversification Opportunities for Masco and Lixil Group

0.15

Correlation Coefficient

Masco  Lixil Group

Average diversification

The 3 months correlation between Masco and Lixil is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Masco and Lixil Group Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lixil Group Corp and Masco 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 Masco are associated (or correlated) with Lixil Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lixil Group Corp has no effect on the direction of Masco i.e., Masco and Lixil Group go up and down completely randomly.

Pair Corralation between Masco and Lixil Group

Considering the 90-day investment horizon Masco is expected to generate 0.85 times more return on investment than Lixil Group. However, Masco is 1.18 times less risky than Lixil Group. It trades about -0.09 of its potential returns per unit of risk. Lixil Group Corp is currently generating about -0.14 per unit of risk. If you would invest  8,181  in Masco on September 20, 2024 and sell it today you would lose (523.00) from holding Masco or give up 6.39% of portfolio value over 90 days.

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

Masco  vs.  Lixil Group Corp

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 comparatively stable basic indicators, Masco is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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 latest uncertain performance, the Stock's basic 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 Masco and Lixil Group

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

The idea behind Masco and Lixil Group Corp 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.