Correlation Between Daikin IndustriesLtd and Compagnie

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

By analyzing existing cross correlation between Daikin IndustriesLtd and Compagnie de Saint Gobain, you can compare the effects of market volatilities on Daikin IndustriesLtd and Compagnie 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 Daikin IndustriesLtd with a short position of Compagnie. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daikin IndustriesLtd and Compagnie.

Diversification Opportunities for Daikin IndustriesLtd and Compagnie

-0.74

Correlation Coefficient

Daikin IndustriesLtd  Compagnie

Pay attention - limited upside

The 3 months correlation between Daikin and Compagnie is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Daikin IndustriesLtd and Compagnie de Saint Gobain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie de Saint and Daikin IndustriesLtd 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 Daikin IndustriesLtd are associated (or correlated) with Compagnie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie de Saint has no effect on the direction of Daikin IndustriesLtd i.e., Daikin IndustriesLtd and Compagnie go up and down completely randomly.

Pair Corralation between Daikin IndustriesLtd and Compagnie

Assuming the 90 days horizon Daikin IndustriesLtd is expected to under-perform the Compagnie. In addition to that, Daikin IndustriesLtd is 1.45 times more volatile than Compagnie de Saint Gobain. It trades about -0.03 of its total potential returns per unit of risk. Compagnie de Saint Gobain is currently generating about 0.11 per unit of volatility. If you would invest  1,549  in Compagnie de Saint Gobain on January 30, 2024 and sell it today you would earn a total of  57.00  from holding Compagnie de Saint Gobain or generate 3.68% return on investment over 90 days.

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

Daikin IndustriesLtd  vs.  Compagnie de Saint Gobain

Daikin IndustriesLtd

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daikin IndustriesLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Compagnie de Saint

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie de Saint Gobain are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Compagnie may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Daikin IndustriesLtd and Compagnie

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

The idea behind Daikin IndustriesLtd and Compagnie de Saint Gobain 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.