Correlation Between Orix Corp and Bancolombia

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

By analyzing existing cross correlation between Orix Corp Ads and Bancolombia SA ADR, you can compare the effects of market volatilities on Orix Corp and Bancolombia 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 Orix Corp with a short position of Bancolombia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orix Corp and Bancolombia.

Diversification Opportunities for Orix Corp and Bancolombia

-0.09

Correlation Coefficient

Orix Corp  Bancolombia

Good diversification

The 3 months correlation between Orix and Bancolombia is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Orix Corp Ads and Bancolombia SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bancolombia SA ADR and Orix Corp 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 Orix Corp Ads are associated (or correlated) with Bancolombia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bancolombia SA ADR has no effect on the direction of Orix Corp i.e., Orix Corp and Bancolombia go up and down completely randomly.

Pair Corralation between Orix Corp and Bancolombia

Allowing for the 90-day total investment horizon Orix Corp Ads is expected to under-perform the Bancolombia. But the stock apears to be less risky and, when comparing its historical volatility, Orix Corp Ads is 1.14 times less risky than Bancolombia. The stock trades about -0.13 of its potential returns per unit of risk. The Bancolombia SA ADR is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,197  in Bancolombia SA ADR on September 27, 2024 and sell it today you would earn a total of  32.00  from holding Bancolombia SA ADR or generate 1.0% return on investment over 90 days.

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

Orix Corp Ads  vs.  Bancolombia SA ADR

Orix Corp Ads

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orix Corp Ads has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady 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.

Bancolombia SA ADR

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bancolombia SA ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward indicators, Bancolombia is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Orix Corp and Bancolombia

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

The idea behind Orix Corp Ads and Bancolombia SA ADR 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.