Correlation Between Xtrackers LevDAX and AOZORA BANK

Can any of the company-specific risk be diversified away by investing in both Xtrackers LevDAX 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 Xtrackers LevDAX and AOZORA BANK into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xtrackers LevDAX and AOZORA BANK LTD, you can compare the effects of market volatilities on Xtrackers LevDAX 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 Xtrackers LevDAX with a short position of AOZORA BANK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xtrackers LevDAX and AOZORA BANK.

Diversification Opportunities for Xtrackers LevDAX and AOZORA BANK

0.52

Correlation Coefficient

Xtrackers LevDAX  AOZORA BANK

Very weak diversification

The 3 months correlation between Xtrackers and AOZORA is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Xtrackers LevDAX and AOZORA BANK LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AOZORA BANK LTD and Xtrackers LevDAX 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 Xtrackers LevDAX 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 LTD has no effect on the direction of Xtrackers LevDAX i.e., Xtrackers LevDAX and AOZORA BANK go up and down completely randomly.

Pair Corralation between Xtrackers LevDAX and AOZORA BANK

Assuming the 90 days trading horizon Xtrackers LevDAX is expected to generate 1.04 times more return on investment than AOZORA BANK. However, Xtrackers LevDAX is 1.04 times more volatile than AOZORA BANK LTD. It trades about 0.19 of its potential returns per unit of risk. AOZORA BANK LTD is currently generating about 0.06 per unit of risk. If you would invest  23,410  in Xtrackers LevDAX on April 23, 2025 and sell it today you would earn a total of  4,975  from holding Xtrackers LevDAX or generate 21.25% return on investment over 90 days.

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

Xtrackers LevDAX  vs.  AOZORA BANK LTD

Xtrackers LevDAX

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers LevDAX are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Xtrackers LevDAX reported solid returns over the last few months and may actually be approaching a breakup point.

AOZORA BANK LTD

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AOZORA BANK LTD are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Xtrackers LevDAX and AOZORA BANK

The main advantage of trading using opposite Xtrackers LevDAX and AOZORA BANK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xtrackers LevDAX 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 Xtrackers LevDAX 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.