Correlation Between Aozora Bank and Peoples Bancorp

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

Diversification Opportunities for Aozora Bank and Peoples Bancorp

0.12

Correlation Coefficient

Aozora Bank  Peoples Bancorp

Average diversification

The 3 months correlation between Aozora and Peoples is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Aozora Bank Ltd and Peoples Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peoples 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 Ltd are associated (or correlated) with Peoples Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peoples Bancorp has no effect on the direction of Aozora Bank i.e., Aozora Bank and Peoples Bancorp go up and down completely randomly.

Pair Corralation between Aozora Bank and Peoples Bancorp

Assuming the 90 days horizon Aozora Bank Ltd is expected to under-perform the Peoples Bancorp. In addition to that, Aozora Bank is 1.27 times more volatile than Peoples Bancorp. It trades about -0.22 of its total potential returns per unit of risk. Peoples Bancorp is currently generating about -0.25 per unit of volatility. If you would invest  3,492  in Peoples Bancorp on October 17, 2024 and sell it today you would lose (337.00) from holding Peoples Bancorp or give up 9.65% of portfolio value over 90 days.

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

Aozora Bank Ltd  vs.  Peoples Bancorp

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.

Peoples Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Peoples Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, Peoples Bancorp is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Aozora Bank and Peoples Bancorp

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

The idea behind Aozora Bank Ltd and Peoples 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.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.