Correlation Between Aozora Bank and DexCom

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

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

Diversification Opportunities for Aozora Bank and DexCom

-0.67

Correlation Coefficient

Aozora Bank  DexCom

Excellent diversification

The 3 months correlation between Aozora and DexCom is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Aozora Bank and DexCom Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DexCom Inc and Aozora Bank 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 Aozora Bank are associated (or correlated) with DexCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DexCom Inc has no effect on the direction of Aozora Bank i.e., Aozora Bank and DexCom go up and down completely randomly.

Pair Corralation between Aozora Bank and DexCom

Assuming the 90 days horizon Aozora Bank is expected to under-perform the DexCom. But the stock apears to be less risky and, when comparing its historical volatility, Aozora Bank is 1.37 times less risky than DexCom. The stock trades about -0.07 of its potential returns per unit of risk. The DexCom Inc is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  7,423  in DexCom Inc on November 29, 2024 and sell it today you would earn a total of  973.00  from holding DexCom Inc or generate 13.11% return on investment over 90 days.

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

Aozora Bank  vs.  DexCom Inc

Aozora Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aozora Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

DexCom Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DexCom Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DexCom reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aozora Bank and DexCom

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

The idea behind Aozora Bank and DexCom Inc 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.