Correlation Between Porsche Automobil and CHIBA BANK

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

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

Diversification Opportunities for Porsche Automobil and CHIBA BANK

0.63

Correlation Coefficient

Porsche Automobil  CHIBA BANK

Poor diversification

The 3 months correlation between Porsche and CHIBA is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Porsche Automobil Holding and CHIBA BANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHIBA BANK and Porsche Automobil 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 Porsche Automobil Holding 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 Porsche Automobil i.e., Porsche Automobil and CHIBA BANK go up and down completely randomly.

Pair Corralation between Porsche Automobil and CHIBA BANK

Assuming the 90 days trading horizon Porsche Automobil Holding is expected to under-perform the CHIBA BANK. In addition to that, Porsche Automobil is 1.06 times more volatile than CHIBA BANK. It trades about -0.01 of its total potential returns per unit of risk. CHIBA BANK is currently generating about 0.22 per unit of volatility. If you would invest  721.00  in CHIBA BANK on December 29, 2024 and sell it today you would earn a total of  159.00  from holding CHIBA BANK or generate 22.05% return on investment over 90 days.

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

Porsche Automobil Holding  vs.  CHIBA BANK

Porsche Automobil Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Porsche Automobil Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Porsche Automobil is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

CHIBA BANK

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in CHIBA BANK are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, CHIBA BANK exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Porsche Automobil and CHIBA BANK

The main advantage of trading using opposite Porsche Automobil and CHIBA BANK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Porsche Automobil 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 Porsche Automobil Holding 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.