Correlation Between Daito Trust and Mitsui Fudosan

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

By analyzing existing cross correlation between Daito Trust Construction and Mitsui Fudosan Co, you can compare the effects of market volatilities on Daito Trust and Mitsui Fudosan 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 Daito Trust with a short position of Mitsui Fudosan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daito Trust and Mitsui Fudosan.

Diversification Opportunities for Daito Trust and Mitsui Fudosan

0.44

Correlation Coefficient

Daito Trust  Mitsui Fudosan

Very weak diversification

The 3 months correlation between Daito and Mitsui is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Daito Trust Construction and Mitsui Fudosan Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitsui Fudosan and Daito Trust 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 Daito Trust Construction are associated (or correlated) with Mitsui Fudosan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitsui Fudosan has no effect on the direction of Daito Trust i.e., Daito Trust and Mitsui Fudosan go up and down completely randomly.

Pair Corralation between Daito Trust and Mitsui Fudosan

Assuming the 90 days horizon Daito Trust Construction is expected to under-perform the Mitsui Fudosan. In addition to that, Daito Trust is 1.33 times more volatile than Mitsui Fudosan Co. It trades about -0.06 of its total potential returns per unit of risk. Mitsui Fudosan Co is currently generating about 0.03 per unit of volatility. If you would invest  2,796  in Mitsui Fudosan Co on March 12, 2024 and sell it today you would earn a total of  88.00  from holding Mitsui Fudosan Co or generate 3.15% return on investment over 90 days.

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

Daito Trust Construction  vs.  Mitsui Fudosan Co

Daito Trust Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daito Trust Construction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak 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.

Mitsui Fudosan

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mitsui Fudosan Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Mitsui Fudosan is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Daito Trust and Mitsui Fudosan

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

The idea behind Daito Trust Construction and Mitsui Fudosan Co 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.