Correlation Between Daikin IndustriesLtd and JAMES HARDIE

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

By analyzing existing cross correlation between Daikin IndustriesLtd and JAMES HARDIE INDUSTADR1, you can compare the effects of market volatilities on Daikin IndustriesLtd and JAMES HARDIE 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 JAMES HARDIE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daikin IndustriesLtd and JAMES HARDIE.

Diversification Opportunities for Daikin IndustriesLtd and JAMES HARDIE

-0.16

Correlation Coefficient

Daikin IndustriesLtd  JAMES HARDIE

Good diversification

The 3 months correlation between Daikin and JAMES is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Daikin IndustriesLtd and JAMES HARDIE INDUSTADR1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAMES HARDIE INDUSTADR1 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 JAMES HARDIE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAMES HARDIE INDUSTADR1 has no effect on the direction of Daikin IndustriesLtd i.e., Daikin IndustriesLtd and JAMES HARDIE go up and down completely randomly.

Pair Corralation between Daikin IndustriesLtd and JAMES HARDIE

Assuming the 90 days horizon Daikin IndustriesLtd is expected to generate 1.63 times more return on investment than JAMES HARDIE. However, Daikin IndustriesLtd is 1.63 times more volatile than JAMES HARDIE INDUSTADR1. It trades about 0.11 of its potential returns per unit of risk. JAMES HARDIE INDUSTADR1 is currently generating about -0.01 per unit of risk. If you would invest  6,738  in Daikin IndustriesLtd on September 22, 2024 and sell it today you would earn a total of  4,187  from holding Daikin IndustriesLtd or generate 62.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.48%
Values	Daily Returns

Daikin IndustriesLtd  vs.  JAMES HARDIE INDUSTADR1

Daikin IndustriesLtd

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Daikin IndustriesLtd are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Daikin IndustriesLtd reported solid returns over the last few months and may actually be approaching a breakup point.

JAMES HARDIE INDUSTADR1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JAMES HARDIE INDUSTADR1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, JAMES HARDIE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Daikin IndustriesLtd and JAMES HARDIE

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

The idea behind Daikin IndustriesLtd and JAMES HARDIE INDUSTADR1 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.