Correlation Between NIBE Industrier and Daikin Industries

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

By analyzing existing cross correlation between NIBE Industrier AB and Daikin Industries Ltd, you can compare the effects of market volatilities on NIBE Industrier and Daikin Industries 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 NIBE Industrier with a short position of Daikin Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of NIBE Industrier and Daikin Industries.

Diversification Opportunities for NIBE Industrier and Daikin Industries

0.75

Correlation Coefficient

NIBE Industrier  Daikin Industries

Poor diversification

The 3 months correlation between NIBE and Daikin is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding NIBE Industrier AB and Daikin Industries Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daikin Industries and NIBE Industrier 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 NIBE Industrier AB are associated (or correlated) with Daikin Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daikin Industries has no effect on the direction of NIBE Industrier i.e., NIBE Industrier and Daikin Industries go up and down completely randomly.

Pair Corralation between NIBE Industrier and Daikin Industries

Assuming the 90 days horizon NIBE Industrier AB is expected to generate 2.02 times more return on investment than Daikin Industries. However, NIBE Industrier is 2.02 times more volatile than Daikin Industries Ltd. It trades about -0.03 of its potential returns per unit of risk. Daikin Industries Ltd is currently generating about -0.1 per unit of risk. If you would invest  486.00  in NIBE Industrier AB on September 21, 2024 and sell it today you would lose (52.00) from holding NIBE Industrier AB or give up 10.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.83%
Values	Daily Returns

NIBE Industrier AB  vs.  Daikin Industries Ltd

NIBE Industrier AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NIBE Industrier AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Daikin Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daikin Industries Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's essential 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 NIBE Industrier and Daikin Industries

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

The idea behind NIBE Industrier AB and Daikin Industries Ltd 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.