Correlation Between Dai Nippon and Maximus

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Can any of the company-specific risk be diversified away by investing in both Dai Nippon and Maximus 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 Maximus 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 Maximus, you can compare the effects of market volatilities on Dai Nippon and Maximus 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 Maximus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dai Nippon and Maximus.

Diversification Opportunities for Dai Nippon and Maximus

0.9
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Dai and Maximus is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Dai Nippon Printing and Maximus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maximus 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 Maximus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maximus has no effect on the direction of Dai Nippon i.e., Dai Nippon and Maximus go up and down completely randomly.

Pair Corralation between Dai Nippon and Maximus

Assuming the 90 days horizon Dai Nippon Printing is expected to generate 0.99 times more return on investment than Maximus. However, Dai Nippon Printing is 1.01 times less risky than Maximus. It trades about -0.25 of its potential returns per unit of risk. Maximus is currently generating about -0.28 per unit of risk. If you would invest  866.00  in Dai Nippon Printing on September 3, 2024 and sell it today you would lose (114.00) from holding Dai Nippon Printing or give up 13.16% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Dai Nippon Printing  vs.  Maximus

 Performance 
       Timeline  
Dai Nippon Printing 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
Maximus 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Maximus has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Dai Nippon and Maximus Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dai Nippon and Maximus

The main advantage of trading using opposite Dai Nippon and Maximus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dai Nippon position performs unexpectedly, Maximus 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 Maximus will offset losses from the drop in Maximus' long position.
The idea behind Dai Nippon Printing and Maximus 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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