Correlation Between AS Latvijas and Aozora Bank

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

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

Diversification Opportunities for AS Latvijas and Aozora Bank

-0.78

Correlation Coefficient

AS Latvijas  Aozora Bank

Pay attention - limited upside

The 3 months correlation between UM9 and Aozora is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding AS Latvijas balzams and Aozora Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aozora Bank and AS Latvijas 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 AS Latvijas balzams 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 AS Latvijas i.e., AS Latvijas and Aozora Bank go up and down completely randomly.

Pair Corralation between AS Latvijas and Aozora Bank

Assuming the 90 days trading horizon AS Latvijas balzams is expected to generate 0.14 times more return on investment than Aozora Bank. However, AS Latvijas balzams is 7.08 times less risky than Aozora Bank. It trades about 0.13 of its potential returns per unit of risk. Aozora Bank is currently generating about -0.03 per unit of risk. If you would invest  890.00  in AS Latvijas balzams on September 14, 2024 and sell it today you would earn a total of  20.00  from holding AS Latvijas balzams or generate 2.25% return on investment over 90 days.

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

AS Latvijas balzams  vs.  Aozora Bank

AS Latvijas balzams

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AS Latvijas balzams are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, AS Latvijas is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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.

Pair Trading with AS Latvijas and Aozora Bank

The main advantage of trading using opposite AS Latvijas and Aozora Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AS Latvijas 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 AS Latvijas balzams and Aozora 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.

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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.