Correlation Between Orix Corp and US Bancorp

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

Diversification Opportunities for Orix Corp and US Bancorp

-0.35

Correlation Coefficient

Orix Corp  US Bancorp

Very good diversification

The 3 months correlation between Orix and USB is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Orix Corp Ads and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp 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 US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of Orix Corp i.e., Orix Corp and US Bancorp go up and down completely randomly.

Pair Corralation between Orix Corp and US Bancorp

Allowing for the 90-day total investment horizon Orix Corp Ads is expected to generate 0.69 times more return on investment than US Bancorp. However, Orix Corp Ads is 1.45 times less risky than US Bancorp. It trades about 0.05 of its potential returns per unit of risk. US Bancorp is currently generating about 0.03 per unit of risk. If you would invest  7,543  in Orix Corp Ads on September 26, 2024 and sell it today you would earn a total of  3,058  from holding Orix Corp Ads or generate 40.54% 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.  US Bancorp

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 unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

US Bancorp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in US Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, US Bancorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Orix Corp and US Bancorp

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

The idea behind Orix Corp Ads and US Bancorp 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.