Correlation Between Advanced Medical and Chiba Bank

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

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

Diversification Opportunities for Advanced Medical and Chiba Bank

0.1

Correlation Coefficient

Advanced Medical  Chiba Bank

Average diversification

The 3 months correlation between Advanced and Chiba is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Advanced Medical Solutions and Chiba Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chiba Bank and Advanced Medical 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 Advanced Medical Solutions are associated (or correlated) with Chiba Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chiba Bank has no effect on the direction of Advanced Medical i.e., Advanced Medical and Chiba Bank go up and down completely randomly.

Pair Corralation between Advanced Medical and Chiba Bank

Assuming the 90 days trading horizon Advanced Medical is expected to generate 1.4 times less return on investment than Chiba Bank. In addition to that, Advanced Medical is 1.81 times more volatile than Chiba Bank. It trades about 0.06 of its total potential returns per unit of risk. Chiba Bank is currently generating about 0.15 per unit of volatility. If you would invest  665.00  in Chiba Bank on October 23, 2024 and sell it today you would earn a total of  105.00  from holding Chiba Bank or generate 15.79% return on investment over 90 days.

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

Advanced Medical Solutions  vs.  Chiba Bank

Advanced Medical Sol

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Advanced Medical Solutions are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Advanced Medical may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Chiba Bank

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Advanced Medical and Chiba Bank

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

The idea behind Advanced Medical Solutions and Chiba Bank 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.