Correlation Between Analog Devices and Chiba Bank

Can any of the company-specific risk be diversified away by investing in both Analog Devices and Chiba Bank 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 Analog Devices and Chiba Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Analog Devices and Chiba Bank Ltd, you can compare the effects of market volatilities on Analog Devices and Chiba Bank 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 Analog Devices with a short position of Chiba Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Analog Devices and Chiba Bank.

Diversification Opportunities for Analog Devices and Chiba Bank

0.3

Correlation Coefficient

Analog Devices  Chiba Bank

Weak diversification

The 3 months correlation between Analog and Chiba is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and Chiba Bank Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chiba Bank and Analog Devices 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 Analog Devices are associated (or correlated) with Chiba Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chiba Bank has no effect on the direction of Analog Devices i.e., Analog Devices and Chiba Bank go up and down completely randomly.

Pair Corralation between Analog Devices and Chiba Bank

Considering the 90-day investment horizon Analog Devices is expected to generate 1.55 times less return on investment than Chiba Bank. But when comparing it to its historical volatility, Analog Devices is 1.84 times less risky than Chiba Bank. It trades about 0.04 of its potential returns per unit of risk. Chiba Bank Ltd is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,730  in Chiba Bank Ltd on September 29, 2024 and sell it today you would earn a total of  1,038  from holding Chiba Bank Ltd or generate 38.02% return on investment over 90 days.

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

Analog Devices  vs.  Chiba Bank Ltd

Analog Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Chiba Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chiba Bank Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Chiba Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Analog Devices and Chiba Bank

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

The idea behind Analog Devices and Chiba Bank Ltd 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.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.