Correlation Between Hang Seng and Aozora Bank

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

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

Diversification Opportunities for Hang Seng and Aozora Bank

0.0

Correlation Coefficient

Hang Seng  Aozora Bank

Pay attention - limited upside

The 3 months correlation between Hang and Aozora is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Hang Seng Bank and Aozora Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aozora Bank and Hang Seng 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 Hang Seng 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 Hang Seng i.e., Hang Seng and Aozora Bank go up and down completely randomly.

Pair Corralation between Hang Seng and Aozora Bank

If you would invest  1,173  in Hang Seng Bank on December 20, 2024 and sell it today you would earn a total of  217.00  from holding Hang Seng Bank or generate 18.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Hang Seng Bank  vs.  Aozora Bank

Hang Seng Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hang Seng Bank are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Hang Seng showed solid returns over the last few months and may actually be approaching a breakup point.

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 nearly stable basic indicators, Aozora Bank is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Hang Seng and Aozora Bank

The main advantage of trading using opposite Hang Seng and Aozora Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hang Seng 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 Hang Seng 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.

Check out your portfolio center.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.