Correlation Between Aozora Bank and Banco Del

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

By analyzing existing cross correlation between Aozora Bank Ltd and Banco del Bajo, you can compare the effects of market volatilities on Aozora Bank and Banco Del 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 Banco Del. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aozora Bank and Banco Del.

Diversification Opportunities for Aozora Bank and Banco Del

0.72

Correlation Coefficient

Aozora Bank  Banco Del

Poor diversification

The 3 months correlation between Aozora and Banco is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Aozora Bank Ltd and Banco del Bajo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco del Bajo 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 Ltd are associated (or correlated) with Banco Del. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco del Bajo has no effect on the direction of Aozora Bank i.e., Aozora Bank and Banco Del go up and down completely randomly.

Pair Corralation between Aozora Bank and Banco Del

Assuming the 90 days horizon Aozora Bank Ltd is expected to generate 0.24 times more return on investment than Banco Del. However, Aozora Bank Ltd is 4.17 times less risky than Banco Del. It trades about -0.03 of its potential returns per unit of risk. Banco del Bajo is currently generating about -0.08 per unit of risk. If you would invest  449.00  in Aozora Bank Ltd on September 13, 2024 and sell it today you would lose (10.00) from holding Aozora Bank Ltd or give up 2.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	23.81%
Values	Daily Returns

Aozora Bank Ltd  vs.  Banco del Bajo

Aozora Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aozora Bank Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Aozora Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Banco del Bajo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco del Bajo has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward-looking indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Aozora Bank and Banco Del

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

The idea behind Aozora Bank Ltd and Banco del Bajo 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.