Correlation Between Aozora Bank and Sound Financial

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

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

Diversification Opportunities for Aozora Bank and Sound Financial

0.13

Correlation Coefficient

Aozora Bank  Sound Financial

Average diversification

The 3 months correlation between Aozora and Sound is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Aozora Bank and Sound Financial Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sound Financial Bancorp 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 Sound Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sound Financial Bancorp has no effect on the direction of Aozora Bank i.e., Aozora Bank and Sound Financial go up and down completely randomly.

Pair Corralation between Aozora Bank and Sound Financial

If you would invest  1,989  in Aozora Bank on October 12, 2024 and sell it today you would earn a total of  0.00  from holding Aozora Bank or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	5.0%
Values	Daily Returns

Aozora Bank  vs.  Sound Financial Bancorp

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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Sound Financial Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sound Financial Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Sound Financial is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Aozora Bank and Sound Financial

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

The idea behind Aozora Bank and Sound Financial Bancorp 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.