Correlation Between Dai Nippon and Daiwa Securities

Can any of the company-specific risk be diversified away by investing in both Dai Nippon and Daiwa Securities 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 Dai Nippon and Daiwa Securities into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dai Nippon Printing and Daiwa Securities Group, you can compare the effects of market volatilities on Dai Nippon and Daiwa Securities 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 Dai Nippon with a short position of Daiwa Securities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dai Nippon and Daiwa Securities.

Diversification Opportunities for Dai Nippon and Daiwa Securities

0.77

Correlation Coefficient

Dai Nippon  Daiwa Securities

Poor diversification

The 3 months correlation between Dai and Daiwa is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Dai Nippon Printing and Daiwa Securities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daiwa Securities and Dai Nippon 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 Dai Nippon Printing are associated (or correlated) with Daiwa Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daiwa Securities has no effect on the direction of Dai Nippon i.e., Dai Nippon and Daiwa Securities go up and down completely randomly.

Pair Corralation between Dai Nippon and Daiwa Securities

Assuming the 90 days horizon Dai Nippon Printing is expected to under-perform the Daiwa Securities. But the pink sheet apears to be less risky and, when comparing its historical volatility, Dai Nippon Printing is 1.53 times less risky than Daiwa Securities. The pink sheet trades about -0.13 of its potential returns per unit of risk. The Daiwa Securities Group is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  733.00  in Daiwa Securities Group on September 2, 2024 and sell it today you would lose (83.00) from holding Daiwa Securities Group or give up 11.32% of portfolio value over 90 days.

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

Dai Nippon Printing  vs.  Daiwa Securities Group

Dai Nippon Printing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dai Nippon Printing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Daiwa Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Daiwa Securities Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Dai Nippon and Daiwa Securities

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

The idea behind Dai Nippon Printing and Daiwa Securities Group 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.