Correlation Between Mitsui Fudosan and Daito Trust

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

By analyzing existing cross correlation between Mitsui Fudosan Co and Daito Trust Construction, you can compare the effects of market volatilities on Mitsui Fudosan and Daito Trust 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 Mitsui Fudosan with a short position of Daito Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mitsui Fudosan and Daito Trust.

Diversification Opportunities for Mitsui Fudosan and Daito Trust

0.43

Correlation Coefficient

Mitsui Fudosan  Daito Trust

Very weak diversification

The 3 months correlation between Mitsui and Daito is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Mitsui Fudosan Co and Daito Trust Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daito Trust Construction and Mitsui Fudosan 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 Mitsui Fudosan Co are associated (or correlated) with Daito Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daito Trust Construction has no effect on the direction of Mitsui Fudosan i.e., Mitsui Fudosan and Daito Trust go up and down completely randomly.

Pair Corralation between Mitsui Fudosan and Daito Trust

Assuming the 90 days horizon Mitsui Fudosan Co is expected to generate 30.38 times more return on investment than Daito Trust. However, Mitsui Fudosan is 30.38 times more volatile than Daito Trust Construction. It trades about 0.17 of its potential returns per unit of risk. Daito Trust Construction is currently generating about 0.02 per unit of risk. If you would invest  1,780  in Mitsui Fudosan Co on September 24, 2024 and sell it today you would lose (975.00) from holding Mitsui Fudosan Co or give up 54.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	73.84%
Values	Daily Returns

Mitsui Fudosan Co  vs.  Daito Trust Construction

Mitsui Fudosan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitsui Fudosan Co 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 technical and fundamental 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.

Daito Trust Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daito Trust Construction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak 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 Mitsui Fudosan and Daito Trust

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

The idea behind Mitsui Fudosan Co and Daito Trust Construction 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.