Correlation Between Orix Corp and SLM Corp

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

Diversification Opportunities for Orix Corp and SLM Corp

0.2

Correlation Coefficient

Orix Corp  SLM Corp

Modest diversification

The 3 months correlation between Orix and SLM is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Orix Corp Ads and SLM Corp Pb in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SLM Corp Pb 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 SLM Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SLM Corp Pb has no effect on the direction of Orix Corp i.e., Orix Corp and SLM Corp go up and down completely randomly.

Pair Corralation between Orix Corp and SLM Corp

Allowing for the 90-day total investment horizon Orix Corp is expected to generate 2.78 times less return on investment than SLM Corp. In addition to that, Orix Corp is 3.45 times more volatile than SLM Corp Pb. It trades about 0.02 of its total potential returns per unit of risk. SLM Corp Pb is currently generating about 0.17 per unit of volatility. If you would invest  7,254  in SLM Corp Pb on December 26, 2024 and sell it today you would earn a total of  301.00  from holding SLM Corp Pb or generate 4.15% return on investment over 90 days.

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

Orix Corp Ads  vs.  SLM Corp Pb

Orix Corp Ads

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Orix Corp Ads are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

SLM Corp Pb

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SLM Corp Pb are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, SLM Corp is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Orix Corp and SLM Corp

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

The idea behind Orix Corp Ads and SLM Corp Pb 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..