Correlation Between CHIBA BANK and Aozora Bank

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

Diversification Opportunities for CHIBA BANK and Aozora Bank

-0.47

Correlation Coefficient

CHIBA BANK  Aozora Bank

Very good diversification

The 3 months correlation between CHIBA and Aozora is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding CHIBA BANK and Aozora Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aozora 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 Aozora Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aozora Bank has no effect on the direction of CHIBA BANK i.e., CHIBA BANK and Aozora Bank go up and down completely randomly.

Pair Corralation between CHIBA BANK and Aozora Bank

Assuming the 90 days trading horizon CHIBA BANK is expected to generate 1.01 times more return on investment than Aozora Bank. However, CHIBA BANK is 1.01 times more volatile than Aozora Bank. It trades about 0.06 of its potential returns per unit of risk. Aozora Bank is currently generating about -0.07 per unit of risk. If you would invest  810.00  in CHIBA BANK on December 2, 2024 and sell it today you would earn a total of  45.00  from holding CHIBA BANK or generate 5.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

CHIBA BANK  vs.  Aozora Bank

CHIBA BANK

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CHIBA BANK are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, CHIBA BANK may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Aozora Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aozora Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with CHIBA BANK and Aozora Bank

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

The idea behind CHIBA BANK and Aozora 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.