Correlation Between Secom Co and Lixil Group
Can any of the company-specific risk be diversified away by investing in both Secom Co and Lixil Group 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 Secom Co and Lixil Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Secom Co Ltd and Lixil Group Corp, you can compare the effects of market volatilities on Secom Co and Lixil Group 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 Secom Co with a short position of Lixil Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Secom Co and Lixil Group.
Diversification Opportunities for Secom Co and Lixil Group
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Secom and Lixil is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Secom Co Ltd and Lixil Group Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lixil Group Corp and Secom Co 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 Secom Co Ltd are associated (or correlated) with Lixil Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lixil Group Corp has no effect on the direction of Secom Co i.e., Secom Co and Lixil Group go up and down completely randomly.
Pair Corralation between Secom Co and Lixil Group
Assuming the 90 days horizon Secom Co Ltd is expected to under-perform the Lixil Group. But the pink sheet apears to be less risky and, when comparing its historical volatility, Secom Co Ltd is 1.31 times less risky than Lixil Group. The pink sheet trades about -0.17 of its potential returns per unit of risk. The Lixil Group Corp is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 2,097 in Lixil Group Corp on August 27, 2024 and sell it today you would earn a total of 186.00 from holding Lixil Group Corp or generate 8.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Secom Co Ltd vs. Lixil Group Corp
Performance |
| Timeline |
| Secom Co |
| Lixil Group Corp |
Secom Co and Lixil Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Secom Co and Lixil Group
The main advantage of trading using opposite Secom Co and Lixil Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Secom Co position performs unexpectedly, Lixil Group 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 Lixil Group will offset losses from the drop in Lixil Group's long position.| Secom Co vs. Mitsubishi Estate Co | Secom Co vs. Sekisui House Ltd | Secom Co vs. Daiwa House Industry | Secom Co vs. MSAD Insurance Group |
| Lixil Group vs. Masco | Lixil Group vs. Carrier Global Corp | Lixil Group vs. Daikin IndustriesLtd | Lixil Group vs. Lennox International |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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