Correlation Between Aozora Bank and Bank Of Cyprus

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

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

Diversification Opportunities for Aozora Bank and Bank Of Cyprus

0.11

Correlation Coefficient

Aozora Bank  Bank Of Cyprus

Average diversification

The 3 months correlation between Aozora and Bank is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Aozora Bank Ltd and Bank Of Cyprus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Of Cyprus 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 Ltd are associated (or correlated) with Bank Of Cyprus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Of Cyprus has no effect on the direction of Aozora Bank i.e., Aozora Bank and Bank Of Cyprus go up and down completely randomly.

Pair Corralation between Aozora Bank and Bank Of Cyprus

Assuming the 90 days horizon Aozora Bank is expected to generate 1.35 times less return on investment than Bank Of Cyprus. But when comparing it to its historical volatility, Aozora Bank Ltd is 1.61 times less risky than Bank Of Cyprus. It trades about 0.08 of its potential returns per unit of risk. Bank Of Cyprus is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  389.00  in Bank Of Cyprus on September 30, 2024 and sell it today you would earn a total of  64.00  from holding Bank Of Cyprus or generate 16.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Aozora Bank Ltd  vs.  Bank Of Cyprus

Aozora Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Bank Of Cyprus

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Aozora Bank and Bank Of Cyprus

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

The idea behind Aozora Bank Ltd and Bank Of Cyprus 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.