Correlation Between Mizuho Financial and DBS Group

Can any of the company-specific risk be diversified away by investing in both Mizuho Financial and DBS Group 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 Mizuho Financial and DBS Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Mizuho Financial Group and DBS Group Holdings, you can compare the effects of market volatilities on Mizuho Financial and DBS Group 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 Mizuho Financial with a short position of DBS Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mizuho Financial and DBS Group.

Diversification Opportunities for Mizuho Financial and DBS Group

0.89

Correlation Coefficient

Mizuho Financial  DBS Group

Very poor diversification

The 3 months correlation between Mizuho and DBS is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Mizuho Financial Group and DBS Group Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DBS Group Holdings and Mizuho Financial 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 Mizuho Financial Group are associated (or correlated) with DBS Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DBS Group Holdings has no effect on the direction of Mizuho Financial i.e., Mizuho Financial and DBS Group go up and down completely randomly.

Pair Corralation between Mizuho Financial and DBS Group

Assuming the 90 days horizon Mizuho Financial is expected to generate 1.15 times less return on investment than DBS Group. In addition to that, Mizuho Financial is 1.77 times more volatile than DBS Group Holdings. It trades about 0.08 of its total potential returns per unit of risk. DBS Group Holdings is currently generating about 0.16 per unit of volatility. If you would invest  1,857  in DBS Group Holdings on October 10, 2024 and sell it today you would earn a total of  1,243  from holding DBS Group Holdings or generate 66.94% return on investment over 90 days.

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

Mizuho Financial Group  vs.  DBS Group Holdings

Mizuho Financial

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mizuho Financial Group are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Mizuho Financial reported solid returns over the last few months and may actually be approaching a breakup point.

DBS Group Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DBS Group Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, DBS Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mizuho Financial and DBS Group

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

The idea behind Mizuho Financial Group and DBS Group Holdings 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.