Correlation Between AUTO TRADER and ORIX

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

By analyzing existing cross correlation between AUTO TRADER ADR and ORIX Corporation, you can compare the effects of market volatilities on AUTO TRADER and ORIX 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 AUTO TRADER with a short position of ORIX. Check out your portfolio center. Please also check ongoing floating volatility patterns of AUTO TRADER and ORIX.

Diversification Opportunities for AUTO TRADER and ORIX

-0.12

Correlation Coefficient

AUTO TRADER  ORIX

Good diversification

The 3 months correlation between AUTO and ORIX is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding AUTO TRADER ADR and ORIX Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ORIX and AUTO TRADER 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 AUTO TRADER ADR are associated (or correlated) with ORIX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ORIX has no effect on the direction of AUTO TRADER i.e., AUTO TRADER and ORIX go up and down completely randomly.

Pair Corralation between AUTO TRADER and ORIX

Assuming the 90 days trading horizon AUTO TRADER ADR is expected to under-perform the ORIX. But the stock apears to be less risky and, when comparing its historical volatility, AUTO TRADER ADR is 1.22 times less risky than ORIX. The stock trades about -0.08 of its potential returns per unit of risk. The ORIX Corporation is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,060  in ORIX Corporation on October 25, 2024 and sell it today you would lose (20.00) from holding ORIX Corporation or give up 0.97% of portfolio value over 90 days.

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

AUTO TRADER ADR  vs.  ORIX Corp.

AUTO TRADER ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AUTO TRADER ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

ORIX

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ORIX Corporation are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ORIX may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with AUTO TRADER and ORIX

The main advantage of trading using opposite AUTO TRADER and ORIX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AUTO TRADER position performs unexpectedly, ORIX 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 ORIX will offset losses from the drop in ORIX's long position.

The idea behind AUTO TRADER ADR and ORIX Corporation 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.