Correlation Between TFS FINANCIAL and Mizuho Financial

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

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

Diversification Opportunities for TFS FINANCIAL and Mizuho Financial

0.85

Correlation Coefficient

TFS FINANCIAL  Mizuho Financial

Very poor diversification

The 3 months correlation between TFS and Mizuho is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding TFS FINANCIAL and Mizuho Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mizuho Financial and TFS 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 TFS FINANCIAL are associated (or correlated) with Mizuho Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mizuho Financial has no effect on the direction of TFS FINANCIAL i.e., TFS FINANCIAL and Mizuho Financial go up and down completely randomly.

Pair Corralation between TFS FINANCIAL and Mizuho Financial

Assuming the 90 days trading horizon TFS FINANCIAL is expected to under-perform the Mizuho Financial. But the stock apears to be less risky and, when comparing its historical volatility, TFS FINANCIAL is 1.19 times less risky than Mizuho Financial. The stock trades about -0.37 of its potential returns per unit of risk. The Mizuho Financial Group is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  488.00  in Mizuho Financial Group on October 4, 2024 and sell it today you would lose (22.00) from holding Mizuho Financial Group or give up 4.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	94.74%
Values	Daily Returns

TFS FINANCIAL  vs.  Mizuho Financial Group

TFS FINANCIAL

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TFS FINANCIAL are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, TFS FINANCIAL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 fragile basic indicators, Mizuho Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TFS FINANCIAL and Mizuho Financial

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

The idea behind TFS FINANCIAL and Mizuho Financial Group 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.