Correlation Between Keyence and Daifuku

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

Diversification Opportunities for Keyence and Daifuku

-0.42
  Correlation Coefficient

Very good diversification

The 3 months correlation between Keyence and Daifuku is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Keyence and Daifuku Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daifuku and Keyence 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 Keyence are associated (or correlated) with Daifuku. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daifuku has no effect on the direction of Keyence i.e., Keyence and Daifuku go up and down completely randomly.

Pair Corralation between Keyence and Daifuku

Assuming the 90 days horizon Keyence is expected to generate 4.07 times less return on investment than Daifuku. But when comparing it to its historical volatility, Keyence is 4.24 times less risky than Daifuku. It trades about 0.19 of its potential returns per unit of risk. Daifuku Co is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,833  in Daifuku Co on April 22, 2024 and sell it today you would earn a total of  75.00  from holding Daifuku Co or generate 4.09% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy23.81%
ValuesDaily Returns

Keyence  vs.  Daifuku Co

 Performance 
       Timeline  
Keyence 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Keyence are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating fundamental indicators, Keyence may actually be approaching a critical reversion point that can send shares even higher in August 2024.
Daifuku 

Risk-Adjusted Performance

0 of 100

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

Keyence and Daifuku Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Keyence and Daifuku

The main advantage of trading using opposite Keyence and Daifuku positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Keyence position performs unexpectedly, Daifuku 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 Daifuku will offset losses from the drop in Daifuku's long position.
The idea behind Keyence and Daifuku 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.
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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