Correlation Between Rocket Internet and Daiwa House

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

By analyzing existing cross correlation between Rocket Internet SE and Daiwa House Industry, you can compare the effects of market volatilities on Rocket Internet and Daiwa House 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 Rocket Internet with a short position of Daiwa House. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rocket Internet and Daiwa House.

Diversification Opportunities for Rocket Internet and Daiwa House

0.39

Correlation Coefficient

Rocket Internet  Daiwa House

Weak diversification

The 3 months correlation between Rocket and Daiwa is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Rocket Internet SE and Daiwa House Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daiwa House Industry and Rocket Internet 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 Rocket Internet SE are associated (or correlated) with Daiwa House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daiwa House Industry has no effect on the direction of Rocket Internet i.e., Rocket Internet and Daiwa House go up and down completely randomly.

Pair Corralation between Rocket Internet and Daiwa House

Assuming the 90 days trading horizon Rocket Internet SE is expected to under-perform the Daiwa House. In addition to that, Rocket Internet is 1.15 times more volatile than Daiwa House Industry. It trades about -0.03 of its total potential returns per unit of risk. Daiwa House Industry is currently generating about 0.05 per unit of volatility. If you would invest  2,180  in Daiwa House Industry on October 11, 2024 and sell it today you would earn a total of  760.00  from holding Daiwa House Industry or generate 34.86% return on investment over 90 days.

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

Rocket Internet SE  vs.  Daiwa House Industry

Rocket Internet SE

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rocket Internet SE are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Rocket Internet is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Daiwa House Industry

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Daiwa House Industry are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Daiwa House may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Rocket Internet and Daiwa House

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

The idea behind Rocket Internet SE and Daiwa House Industry 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..