Correlation Between Aozora Bank and REVO INSURANCE

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

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

Diversification Opportunities for Aozora Bank and REVO INSURANCE

-0.68

Correlation Coefficient

Aozora Bank  REVO INSURANCE

Excellent diversification

The 3 months correlation between Aozora and REVO is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Aozora Bank and REVO INSURANCE SPA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REVO INSURANCE SPA and Aozora 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 Aozora Bank are associated (or correlated) with REVO INSURANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REVO INSURANCE SPA has no effect on the direction of Aozora Bank i.e., Aozora Bank and REVO INSURANCE go up and down completely randomly.

Pair Corralation between Aozora Bank and REVO INSURANCE

Assuming the 90 days horizon Aozora Bank is expected to under-perform the REVO INSURANCE. In addition to that, Aozora Bank is 1.92 times more volatile than REVO INSURANCE SPA. It trades about -0.01 of its total potential returns per unit of risk. REVO INSURANCE SPA is currently generating about 0.06 per unit of volatility. If you would invest  799.00  in REVO INSURANCE SPA on September 14, 2024 and sell it today you would earn a total of  306.00  from holding REVO INSURANCE SPA or generate 38.3% return on investment over 90 days.

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

Aozora Bank  vs.  REVO INSURANCE SPA

Aozora Bank

Risk-Adjusted Performance

0 of 100

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.

REVO INSURANCE SPA

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in REVO INSURANCE SPA are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, REVO INSURANCE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aozora Bank and REVO INSURANCE

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

The idea behind Aozora Bank and REVO INSURANCE SPA 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.