Correlation Between Heidelberg Materials and Daikin IndustriesLtd

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

By analyzing existing cross correlation between Heidelberg Materials AG and Daikin IndustriesLtd, you can compare the effects of market volatilities on Heidelberg Materials and Daikin IndustriesLtd 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 Heidelberg Materials with a short position of Daikin IndustriesLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heidelberg Materials and Daikin IndustriesLtd.

Diversification Opportunities for Heidelberg Materials and Daikin IndustriesLtd

0.14

Correlation Coefficient

Heidelberg Materials  Daikin IndustriesLtd

Average diversification

The 3 months correlation between Heidelberg and Daikin is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Heidelberg Materials AG and Daikin IndustriesLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daikin IndustriesLtd and Heidelberg Materials 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 Heidelberg Materials AG are associated (or correlated) with Daikin IndustriesLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daikin IndustriesLtd has no effect on the direction of Heidelberg Materials i.e., Heidelberg Materials and Daikin IndustriesLtd go up and down completely randomly.

Pair Corralation between Heidelberg Materials and Daikin IndustriesLtd

Assuming the 90 days horizon Heidelberg Materials is expected to generate 3.45 times less return on investment than Daikin IndustriesLtd. But when comparing it to its historical volatility, Heidelberg Materials AG is 5.8 times less risky than Daikin IndustriesLtd. It trades about 0.19 of its potential returns per unit of risk. Daikin IndustriesLtd is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  6,738  in Daikin IndustriesLtd on September 23, 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 Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Heidelberg Materials AG  vs.  Daikin IndustriesLtd

Heidelberg Materials

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Heidelberg Materials AG are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Heidelberg Materials reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Heidelberg Materials and Daikin IndustriesLtd

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

The idea behind Heidelberg Materials AG and Daikin IndustriesLtd 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 CEOs Directory module to screen CEOs from public companies around the world.