Correlation Between Orix Corp and Regional Management

Can any of the company-specific risk be diversified away by investing in both Orix Corp and Regional Management 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 Regional Management 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 Regional Management Corp, you can compare the effects of market volatilities on Orix Corp and Regional Management 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 Regional Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orix Corp and Regional Management.

Diversification Opportunities for Orix Corp and Regional Management

0.82

Correlation Coefficient

Orix Corp  Regional Management

Very poor diversification

The 3 months correlation between Orix and Regional is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Orix Corp Ads and Regional Management Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regional Management Corp 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 Regional Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regional Management Corp has no effect on the direction of Orix Corp i.e., Orix Corp and Regional Management go up and down completely randomly.

Pair Corralation between Orix Corp and Regional Management

Allowing for the 90-day total investment horizon Orix Corp Ads is expected to under-perform the Regional Management. But the stock apears to be less risky and, when comparing its historical volatility, Orix Corp Ads is 1.6 times less risky than Regional Management. The stock trades about -0.06 of its potential returns per unit of risk. The Regional Management Corp is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,174  in Regional Management Corp on September 4, 2024 and sell it today you would lose (77.00) from holding Regional Management Corp or give up 2.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Orix Corp Ads  vs.  Regional Management Corp

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 fairly strong basic indicators, Orix Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Regional Management Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Regional Management Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Regional Management is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Orix Corp and Regional Management

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

The idea behind Orix Corp Ads and Regional Management Corp 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.