Correlation Between Aozora Bank and First Guaranty
Can any of the company-specific risk be diversified away by investing in both Aozora Bank and First Guaranty 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 First Guaranty 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 First Guaranty Bancshares, you can compare the effects of market volatilities on Aozora Bank and First Guaranty 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 First Guaranty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aozora Bank and First Guaranty.
Diversification Opportunities for Aozora Bank and First Guaranty
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Aozora and First is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Aozora Bank Ltd and First Guaranty Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Guaranty Bancshares 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 First Guaranty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Guaranty Bancshares has no effect on the direction of Aozora Bank i.e., Aozora Bank and First Guaranty go up and down completely randomly.
Pair Corralation between Aozora Bank and First Guaranty
Assuming the 90 days horizon Aozora Bank is expected to generate 1.48 times less return on investment than First Guaranty. But when comparing it to its historical volatility, Aozora Bank Ltd is 1.18 times less risky than First Guaranty. It trades about 0.01 of its potential returns per unit of risk. First Guaranty Bancshares is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2,085 in First Guaranty Bancshares on August 23, 2024 and sell it today you would earn a total of 129.00 from holding First Guaranty Bancshares or generate 6.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aozora Bank Ltd vs. First Guaranty Bancshares
Performance |
| Timeline |
| Aozora Bank |
| First Guaranty Bancshares |
Aozora Bank and First Guaranty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aozora Bank and First Guaranty
The main advantage of trading using opposite Aozora Bank and First Guaranty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aozora Bank position performs unexpectedly, First Guaranty 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 First Guaranty will offset losses from the drop in First Guaranty's long position.The idea behind Aozora Bank Ltd and First Guaranty Bancshares 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.| First Guaranty vs. CNB Financial | First Guaranty vs. First Citizens BancShares | First Guaranty vs. Texas Capital Bancshares | First Guaranty vs. Merchants Bancorp |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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