Correlation Between Sekisui House and Toray Industries

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

By analyzing existing cross correlation between Sekisui House and Toray Industries ADR, you can compare the effects of market volatilities on Sekisui House and Toray 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 Sekisui House with a short position of Toray Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sekisui House and Toray Industries.

Diversification Opportunities for Sekisui House and Toray Industries

-0.48

Correlation Coefficient

Sekisui House  Toray Industries

Very good diversification

The 3 months correlation between Sekisui and Toray is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Sekisui House and Toray Industries ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toray Industries ADR and Sekisui House 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 Sekisui House are associated (or correlated) with Toray Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toray Industries ADR has no effect on the direction of Sekisui House i.e., Sekisui House and Toray Industries go up and down completely randomly.

Pair Corralation between Sekisui House and Toray Industries

Assuming the 90 days horizon Sekisui House is expected to under-perform the Toray Industries. In addition to that, Sekisui House is 1.38 times more volatile than Toray Industries ADR. It trades about -0.01 of its total potential returns per unit of risk. Toray Industries ADR is currently generating about 0.07 per unit of volatility. If you would invest  1,260  in Toray Industries ADR on December 29, 2024 and sell it today you would earn a total of  112.00  from holding Toray Industries ADR or generate 8.89% return on investment over 90 days.

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

Sekisui House  vs.  Toray Industries ADR

Sekisui House

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sekisui House has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sekisui House is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Toray Industries ADR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Toray Industries ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Toray Industries may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Sekisui House and Toray Industries

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

The idea behind Sekisui House and Toray Industries ADR 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.