Correlation Between Daito Trust and Merchants National
Can any of the company-specific risk be diversified away by investing in both Daito Trust and Merchants National 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 Daito Trust and Merchants National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Daito Trust Construction and Merchants National Properties, you can compare the effects of market volatilities on Daito Trust and Merchants National 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 Daito Trust with a short position of Merchants National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Daito Trust and Merchants National.
Diversification Opportunities for Daito Trust and Merchants National
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Daito and Merchants is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Daito Trust Construction and Merchants National Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants National and Daito Trust 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 Daito Trust Construction are associated (or correlated) with Merchants National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merchants National has no effect on the direction of Daito Trust i.e., Daito Trust and Merchants National go up and down completely randomly.
Pair Corralation between Daito Trust and Merchants National
Assuming the 90 days horizon Daito Trust is expected to generate 2.55 times less return on investment than Merchants National. In addition to that, Daito Trust is 1.78 times more volatile than Merchants National Properties. It trades about 0.03 of its total potential returns per unit of risk. Merchants National Properties is currently generating about 0.13 per unit of volatility. If you would invest 132,980 in Merchants National Properties on August 29, 2024 and sell it today you would earn a total of 42,020 from holding Merchants National Properties or generate 31.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 63.57% |
| Values | Daily Returns |
Daito Trust Construction vs. Merchants National Properties
Performance |
| Timeline |
| Daito Trust Construction |
| Merchants National |
Daito Trust and Merchants National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Daito Trust and Merchants National
The main advantage of trading using opposite Daito Trust and Merchants National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Daito Trust position performs unexpectedly, Merchants National 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 Merchants National will offset losses from the drop in Merchants National's long position.| Daito Trust vs. Daiwa House Industry | Daito Trust vs. Dai Nippon Printing | Daito Trust vs. Sysmex Corp | Daito Trust vs. DSV Panalpina AS |
| Merchants National vs. St Joe Company | Merchants National vs. Secom Co Ltd | Merchants National vs. Daiwa House Industry | Merchants National vs. Henderson Land Development |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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