Correlation Between Intelligent Living and Daikin Industries

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

By analyzing existing cross correlation between Intelligent Living Application and Daikin Industries Ltd, you can compare the effects of market volatilities on Intelligent Living 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 Intelligent Living with a short position of Daikin Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intelligent Living and Daikin Industries.

Diversification Opportunities for Intelligent Living and Daikin Industries

-0.1

Correlation Coefficient

Intelligent Living  Daikin Industries

Good diversification

The 3 months correlation between Intelligent and Daikin is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Intelligent Living Application and Daikin Industries Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daikin Industries and Intelligent Living 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 Intelligent Living Application 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 Intelligent Living i.e., Intelligent Living and Daikin Industries go up and down completely randomly.

Pair Corralation between Intelligent Living and Daikin Industries

Given the investment horizon of 90 days Intelligent Living Application is expected to under-perform the Daikin Industries. In addition to that, Intelligent Living is 4.0 times more volatile than Daikin Industries Ltd. It trades about -0.26 of its total potential returns per unit of risk. Daikin Industries Ltd is currently generating about -0.21 per unit of volatility. If you would invest  1,540  in Daikin Industries Ltd on March 22, 2024 and sell it today you would lose (97.00) from holding Daikin Industries Ltd or give up 6.3% of portfolio value over 90 days.

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

Intelligent Living Application  vs.  Daikin Industries Ltd

Intelligent Living

Risk-Adjusted Performance

0 of 100

Very Weak

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

Daikin Industries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Daikin Industries Ltd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain essential indicators, Daikin Industries may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Intelligent Living and Daikin Industries

The main advantage of trading using opposite Intelligent Living and Daikin Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intelligent Living 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 Intelligent Living Application and Daikin Industries Ltd 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.