Correlation Between Sekisui House and MSAD Insurance

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

By analyzing existing cross correlation between Sekisui House Ltd and MSAD Insurance Group, you can compare the effects of market volatilities on Sekisui House and MSAD Insurance 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 MSAD Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sekisui House and MSAD Insurance.

Diversification Opportunities for Sekisui House and MSAD Insurance

0.3

Correlation Coefficient

Sekisui House  MSAD Insurance

Weak diversification

The 3 months correlation between Sekisui and MSAD is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Sekisui House Ltd and MSAD Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSAD Insurance Group 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 Ltd are associated (or correlated) with MSAD Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSAD Insurance Group has no effect on the direction of Sekisui House i.e., Sekisui House and MSAD Insurance go up and down completely randomly.

Pair Corralation between Sekisui House and MSAD Insurance

Assuming the 90 days horizon Sekisui House Ltd is expected to under-perform the MSAD Insurance. But the pink sheet apears to be less risky and, when comparing its historical volatility, Sekisui House Ltd is 1.34 times less risky than MSAD Insurance. The pink sheet trades about -0.12 of its potential returns per unit of risk. The MSAD Insurance Group is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,269  in MSAD Insurance Group on September 14, 2024 and sell it today you would lose (16.00) from holding MSAD Insurance Group or give up 0.71% of portfolio value over 90 days.

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

Sekisui House Ltd  vs.  MSAD Insurance Group

Sekisui House

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sekisui House Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent 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.

MSAD Insurance Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MSAD Insurance Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, MSAD Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sekisui House and MSAD Insurance

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

The idea behind Sekisui House Ltd and MSAD Insurance Group 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.