Correlation Between American Express and ORIX

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

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

Diversification Opportunities for American Express and ORIX

-0.16

Correlation Coefficient

American Express  ORIX

Good diversification

The 3 months correlation between American and ORIX is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding American Express and ORIX Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ORIX and American Express 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 American Express 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 American Express i.e., American Express and ORIX go up and down completely randomly.

Pair Corralation between American Express and ORIX

Assuming the 90 days trading horizon American Express is expected to generate 0.73 times more return on investment than ORIX. However, American Express is 1.38 times less risky than ORIX. It trades about -0.01 of its potential returns per unit of risk. ORIX Corporation is currently generating about -0.09 per unit of risk. If you would invest  28,751  in American Express on December 1, 2024 and sell it today you would lose (231.00) from holding American Express or give up 0.8% of portfolio value over 90 days.

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

American Express  vs.  ORIX Corp.

American Express

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Express has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, American Express is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ORIX

Risk-Adjusted Performance

Very Weak

Over the last 90 days ORIX Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with American Express and ORIX

The main advantage of trading using opposite American Express and ORIX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Express 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 American Express 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.

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 Global Correlations module to find global opportunities by holding instruments from different markets.