Correlation Between CHIBA BANK and Preferred Bank

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

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

Diversification Opportunities for CHIBA BANK and Preferred Bank

0.73

Correlation Coefficient

CHIBA BANK  Preferred Bank

Poor diversification

The 3 months correlation between CHIBA and Preferred is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding CHIBA BANK and Preferred Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Preferred Bank and CHIBA 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 CHIBA BANK are associated (or correlated) with Preferred Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Preferred Bank has no effect on the direction of CHIBA BANK i.e., CHIBA BANK and Preferred Bank go up and down completely randomly.

Pair Corralation between CHIBA BANK and Preferred Bank

Assuming the 90 days trading horizon CHIBA BANK is expected to generate 1.19 times less return on investment than Preferred Bank. But when comparing it to its historical volatility, CHIBA BANK is 1.58 times less risky than Preferred Bank. It trades about 0.1 of its potential returns per unit of risk. Preferred Bank is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  7,700  in Preferred Bank on October 6, 2024 and sell it today you would earn a total of  600.00  from holding Preferred Bank or generate 7.79% return on investment over 90 days.

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

CHIBA BANK  vs.  Preferred Bank

CHIBA BANK

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CHIBA BANK are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, CHIBA BANK is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Preferred Bank

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Preferred Bank are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Preferred Bank reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CHIBA BANK and Preferred Bank

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

The idea behind CHIBA BANK and Preferred 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 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.