Correlation Between Burnham Holdings and Daikin Industries

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Can any of the company-specific risk be diversified away by investing in both Burnham Holdings 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 Burnham Holdings and Daikin Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Burnham Holdings and Daikin Industries, you can compare the effects of market volatilities on Burnham Holdings 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 Burnham Holdings with a short position of Daikin Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Burnham Holdings and Daikin Industries.

Diversification Opportunities for Burnham Holdings and Daikin Industries

-0.75
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Burnham and Daikin is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Burnham Holdings and Daikin Industries Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daikin Industries and Burnham Holdings 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 Burnham Holdings 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 Burnham Holdings i.e., Burnham Holdings and Daikin Industries go up and down completely randomly.

Pair Corralation between Burnham Holdings and Daikin Industries

Assuming the 90 days horizon Burnham Holdings is expected to generate 1.15 times more return on investment than Daikin Industries. However, Burnham Holdings is 1.15 times more volatile than Daikin Industries. It trades about -0.03 of its potential returns per unit of risk. Daikin Industries is currently generating about -0.08 per unit of risk. If you would invest  1,375  in Burnham Holdings on December 29, 2023 and sell it today you would lose (25.00) from holding Burnham Holdings or give up 1.82% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Burnham Holdings  vs.  Daikin Industries Ltd

 Performance 
       Timeline  
Burnham Holdings 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Burnham Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental indicators, Burnham Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.
Daikin Industries 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Daikin Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in April 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Burnham Holdings and Daikin Industries Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Burnham Holdings and Daikin Industries

The main advantage of trading using opposite Burnham Holdings and Daikin Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Burnham Holdings 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 Burnham Holdings and Daikin Industries 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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