Correlation Between Monotaro and Dai Nippon

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

By analyzing existing cross correlation between Monotaro Co and Dai Nippon Printing, you can compare the effects of market volatilities on Monotaro and Dai Nippon 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 Monotaro with a short position of Dai Nippon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monotaro and Dai Nippon.

Diversification Opportunities for Monotaro and Dai Nippon

-0.34

Correlation Coefficient

Monotaro  Dai Nippon

Very good diversification

The 3 months correlation between Monotaro and Dai is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Monotaro Co and Dai Nippon Printing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dai Nippon Printing and Monotaro 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 Monotaro Co are associated (or correlated) with Dai Nippon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dai Nippon Printing has no effect on the direction of Monotaro i.e., Monotaro and Dai Nippon go up and down completely randomly.

Pair Corralation between Monotaro and Dai Nippon

Assuming the 90 days horizon Monotaro Co is expected to under-perform the Dai Nippon. But the pink sheet apears to be less risky and, when comparing its historical volatility, Monotaro Co is 1.03 times less risky than Dai Nippon. The pink sheet trades about -0.08 of its potential returns per unit of risk. The Dai Nippon Printing is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  755.00  in Dai Nippon Printing on October 26, 2024 and sell it today you would lose (27.00) from holding Dai Nippon Printing or give up 3.58% of portfolio value over 90 days.

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

Monotaro Co  vs.  Dai Nippon Printing

Monotaro

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Monotaro Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Monotaro may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Dai Nippon Printing

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Monotaro and Dai Nippon

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

The idea behind Monotaro Co and Dai Nippon Printing 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.