Correlation Between First Fidelity and ORIX Leasing

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

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

Diversification Opportunities for First Fidelity and ORIX Leasing

0.58

Correlation Coefficient

First Fidelity  ORIX Leasing

Very weak diversification

The 3 months correlation between First and ORIX is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding First Fidelity Leasing and ORIX Leasing Pakistan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ORIX Leasing Pakistan and First Fidelity 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 First Fidelity Leasing are associated (or correlated) with ORIX Leasing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ORIX Leasing Pakistan has no effect on the direction of First Fidelity i.e., First Fidelity and ORIX Leasing go up and down completely randomly.

Pair Corralation between First Fidelity and ORIX Leasing

Assuming the 90 days trading horizon First Fidelity Leasing is expected to under-perform the ORIX Leasing. In addition to that, First Fidelity is 2.5 times more volatile than ORIX Leasing Pakistan. It trades about -0.04 of its total potential returns per unit of risk. ORIX Leasing Pakistan is currently generating about -0.06 per unit of volatility. If you would invest  3,809  in ORIX Leasing Pakistan on December 22, 2024 and sell it today you would lose (199.00) from holding ORIX Leasing Pakistan or give up 5.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.44%
Values	Daily Returns

First Fidelity Leasing  vs.  ORIX Leasing Pakistan

First Fidelity Leasing

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Fidelity Leasing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

ORIX Leasing Pakistan

Risk-Adjusted Performance

Very Weak

Over the last 90 days ORIX Leasing Pakistan has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ORIX Leasing is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Fidelity and ORIX Leasing

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

The idea behind First Fidelity Leasing and ORIX Leasing Pakistan 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.