Correlation Between Japan Post and Mizuho Financial

Can any of the company-specific risk be diversified away by investing in both Japan Post and Mizuho Financial 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 Japan Post and Mizuho Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Japan Post Bank and Mizuho Financial Group, you can compare the effects of market volatilities on Japan Post and Mizuho Financial 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 Japan Post with a short position of Mizuho Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Japan Post and Mizuho Financial.

Diversification Opportunities for Japan Post and Mizuho Financial

0.88

Correlation Coefficient

Japan Post  Mizuho Financial

Very poor diversification

The 3 months correlation between Japan and Mizuho is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Japan Post Bank and Mizuho Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mizuho Financial and Japan Post 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 Japan Post Bank are associated (or correlated) with Mizuho Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mizuho Financial has no effect on the direction of Japan Post i.e., Japan Post and Mizuho Financial go up and down completely randomly.

Pair Corralation between Japan Post and Mizuho Financial

Assuming the 90 days horizon Japan Post is expected to generate 3.64 times less return on investment than Mizuho Financial. In addition to that, Japan Post is 1.21 times more volatile than Mizuho Financial Group. It trades about 0.05 of its total potential returns per unit of risk. Mizuho Financial Group is currently generating about 0.21 per unit of volatility. If you would invest  343.00  in Mizuho Financial Group on September 23, 2024 and sell it today you would earn a total of  109.00  from holding Mizuho Financial Group or generate 31.78% return on investment over 90 days.

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

Japan Post Bank  vs.  Mizuho Financial Group

Japan Post Bank

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Japan Post Bank are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Japan Post may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Mizuho Financial

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mizuho Financial Group are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Mizuho Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Japan Post and Mizuho Financial

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

The idea behind Japan Post Bank and Mizuho Financial 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.