Correlation Between TAIYO YUDEN and Aozora Bank

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Can any of the company-specific risk be diversified away by investing in both TAIYO YUDEN 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 TAIYO YUDEN and Aozora Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TAIYO YUDEN and Aozora Bank, you can compare the effects of market volatilities on TAIYO YUDEN 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 TAIYO YUDEN with a short position of Aozora Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of TAIYO YUDEN and Aozora Bank.

Diversification Opportunities for TAIYO YUDEN and Aozora Bank

0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between TAIYO and Aozora is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding TAIYO YUDEN and Aozora Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aozora Bank and TAIYO YUDEN 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 TAIYO YUDEN 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 TAIYO YUDEN i.e., TAIYO YUDEN and Aozora Bank go up and down completely randomly.

Pair Corralation between TAIYO YUDEN and Aozora Bank

Assuming the 90 days trading horizon TAIYO YUDEN is expected to under-perform the Aozora Bank. In addition to that, TAIYO YUDEN is 1.8 times more volatile than Aozora Bank. It trades about -0.22 of its total potential returns per unit of risk. Aozora Bank is currently generating about -0.04 per unit of volatility. If you would invest  1,580  in Aozora Bank on September 3, 2024 and sell it today you would lose (90.00) from holding Aozora Bank or give up 5.7% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

TAIYO YUDEN  vs.  Aozora Bank

 Performance 
       Timeline  
TAIYO YUDEN 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days TAIYO YUDEN has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
Aozora Bank 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

TAIYO YUDEN and Aozora Bank Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with TAIYO YUDEN and Aozora Bank

The main advantage of trading using opposite TAIYO YUDEN and Aozora Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TAIYO YUDEN 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 TAIYO YUDEN 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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