Correlation Between Territorial Bancorp and Aozora Bank

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

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

Diversification Opportunities for Territorial Bancorp and Aozora Bank

-0.05

Correlation Coefficient

Territorial Bancorp  Aozora Bank

Good diversification

The 3 months correlation between Territorial and Aozora is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Territorial Bancorp and Aozora Bank Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aozora Bank and Territorial Bancorp 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 Territorial Bancorp are associated (or correlated) with Aozora Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aozora Bank has no effect on the direction of Territorial Bancorp i.e., Territorial Bancorp and Aozora Bank go up and down completely randomly.

Pair Corralation between Territorial Bancorp and Aozora Bank

Given the investment horizon of 90 days Territorial Bancorp is expected to generate 2.35 times more return on investment than Aozora Bank. However, Territorial Bancorp is 2.35 times more volatile than Aozora Bank Ltd. It trades about 0.09 of its potential returns per unit of risk. Aozora Bank Ltd is currently generating about 0.02 per unit of risk. If you would invest  948.00  in Territorial Bancorp on September 4, 2024 and sell it today you would earn a total of  136.00  from holding Territorial Bancorp or generate 14.35% return on investment over 90 days.

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

Territorial Bancorp  vs.  Aozora Bank Ltd

Territorial Bancorp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Territorial Bancorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Territorial Bancorp disclosed solid returns over the last few months and may actually be approaching a breakup point.

Aozora Bank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aozora Bank Ltd are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Territorial Bancorp and Aozora Bank

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

The idea behind Territorial Bancorp and Aozora Bank Ltd 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.