Correlation Between Mizuho Financial and AAP
Can any of the company-specific risk be diversified away by investing in both Mizuho Financial and AAP 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 Mizuho Financial and AAP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mizuho Financial Group and AAP Inc, you can compare the effects of market volatilities on Mizuho Financial and AAP 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 Mizuho Financial with a short position of AAP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mizuho Financial and AAP.
Diversification Opportunities for Mizuho Financial and AAP
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Mizuho and AAP is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Mizuho Financial Group and AAP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAP Inc and Mizuho Financial 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 Mizuho Financial Group are associated (or correlated) with AAP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAP Inc has no effect on the direction of Mizuho Financial i.e., Mizuho Financial and AAP go up and down completely randomly.
Pair Corralation between Mizuho Financial and AAP
Assuming the 90 days horizon Mizuho Financial is expected to generate 14.53 times less return on investment than AAP. But when comparing it to its historical volatility, Mizuho Financial Group is 12.22 times less risky than AAP. It trades about 0.08 of its potential returns per unit of risk. AAP Inc is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 0.80 in AAP Inc on December 1, 2024 and sell it today you would lose (0.78) from holding AAP Inc or give up 97.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.4% |
| Values | Daily Returns |
Mizuho Financial Group vs. AAP Inc
Performance |
| Timeline |
| Mizuho Financial |
| AAP Inc |
Mizuho Financial and AAP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mizuho Financial and AAP
The main advantage of trading using opposite Mizuho Financial and AAP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mizuho Financial position performs unexpectedly, AAP 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 AAP will offset losses from the drop in AAP's long position.| Mizuho Financial vs. Banco De Chile | ||
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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