Correlation Between Aozora Bank and Dimeco

Can any of the company-specific risk be diversified away by investing in both Aozora Bank and Dimeco 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 Dimeco 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 Dimeco Inc, you can compare the effects of market volatilities on Aozora Bank and Dimeco 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 Dimeco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aozora Bank and Dimeco.

Diversification Opportunities for Aozora Bank and Dimeco

0.15

Correlation Coefficient

Aozora Bank  Dimeco

Average diversification

The 3 months correlation between Aozora and Dimeco is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Aozora Bank Ltd and Dimeco Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimeco 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 Ltd are associated (or correlated) with Dimeco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimeco Inc has no effect on the direction of Aozora Bank i.e., Aozora Bank and Dimeco go up and down completely randomly.

Pair Corralation between Aozora Bank and Dimeco

Assuming the 90 days horizon Aozora Bank Ltd is expected to under-perform the Dimeco. In addition to that, Aozora Bank is 1.21 times more volatile than Dimeco Inc. It trades about -0.24 of its total potential returns per unit of risk. Dimeco Inc is currently generating about 0.19 per unit of volatility. If you would invest  3,850  in Dimeco Inc on October 26, 2024 and sell it today you would earn a total of  295.00  from holding Dimeco Inc or generate 7.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Aozora Bank Ltd  vs.  Dimeco Inc

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 latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Dimeco Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dimeco Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Dimeco 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 Dimeco

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

The idea behind Aozora Bank Ltd and Dimeco 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..