Correlation Between Capital One and ORIX

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

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

Diversification Opportunities for Capital One and ORIX

0.3

Correlation Coefficient

Capital One  ORIX

Weak diversification

The 3 months correlation between Capital and ORIX is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and ORIX Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ORIX and Capital One 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 Capital One Financial 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 Capital One i.e., Capital One and ORIX go up and down completely randomly.

Pair Corralation between Capital One and ORIX

Assuming the 90 days horizon Capital One Financial is expected to under-perform the ORIX. In addition to that, Capital One is 1.45 times more volatile than ORIX Corporation. It trades about -0.02 of its total potential returns per unit of risk. ORIX Corporation is currently generating about -0.02 per unit of volatility. If you would invest  2,040  in ORIX Corporation on December 29, 2024 and sell it today you would lose (60.00) from holding ORIX Corporation or give up 2.94% of portfolio value over 90 days.

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

Capital One Financial  vs.  ORIX Corp.

Capital One Financial

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Capital One and ORIX

The main advantage of trading using opposite Capital One and ORIX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital One 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 Capital One Financial 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.