Correlation Between Aozora Bank and Agricultural Bank

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

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

Diversification Opportunities for Aozora Bank and Agricultural Bank

-0.53

Correlation Coefficient

Aozora Bank  Agricultural Bank

Excellent diversification

The 3 months correlation between Aozora and Agricultural is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Aozora Bank and Agricultural Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agricultural Bank 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 Agricultural Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agricultural Bank has no effect on the direction of Aozora Bank i.e., Aozora Bank and Agricultural Bank go up and down completely randomly.

Pair Corralation between Aozora Bank and Agricultural Bank

Assuming the 90 days horizon Aozora Bank is expected to under-perform the Agricultural Bank. But the stock apears to be less risky and, when comparing its historical volatility, Aozora Bank is 5.53 times less risky than Agricultural Bank. The stock trades about -0.08 of its potential returns per unit of risk. The Agricultural Bank of is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  37.00  in Agricultural Bank of on October 7, 2024 and sell it today you would earn a total of  15.00  from holding Agricultural Bank of or generate 40.54% return on investment over 90 days.

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

Aozora Bank  vs.  Agricultural Bank of

Aozora Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aozora Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Aozora Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Agricultural Bank

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Agricultural Bank of are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Agricultural Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aozora Bank and Agricultural Bank

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

The idea behind Aozora Bank and Agricultural Bank of 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.