Correlation Between Orix Corp and Zip Co

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

Diversification Opportunities for Orix Corp and Zip Co

-0.67

Correlation Coefficient

Orix Corp  Zip Co

Excellent diversification

The 3 months correlation between Orix and Zip is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Orix Corp Ads and Zip Co Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zip Co Limited 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 Zip Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zip Co Limited has no effect on the direction of Orix Corp i.e., Orix Corp and Zip Co go up and down completely randomly.

Pair Corralation between Orix Corp and Zip Co

Allowing for the 90-day total investment horizon Orix Corp is expected to generate 16.13 times less return on investment than Zip Co. But when comparing it to its historical volatility, Orix Corp Ads is 7.72 times less risky than Zip Co. It trades about 0.05 of its potential returns per unit of risk. Zip Co Limited is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  110.00  in Zip Co Limited on September 5, 2024 and sell it today you would earn a total of  115.00  from holding Zip Co Limited or generate 104.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.82%
Values	Daily Returns

Orix Corp Ads  vs.  Zip Co Limited

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.

Zip Co Limited

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zip Co Limited are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Zip Co reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Orix Corp and Zip Co

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

The idea behind Orix Corp Ads and Zip Co Limited 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.