Correlation Between Loews Corp and Orix Corp

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

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

Diversification Opportunities for Loews Corp and Orix Corp

0.46

Correlation Coefficient

Loews Corp  Orix Corp

Very weak diversification

The 3 months correlation between Loews and Orix is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Loews Corp and Orix Corp Ads in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orix Corp Ads and Loews 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 Loews Corp are associated (or correlated) with Orix Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orix Corp Ads has no effect on the direction of Loews Corp i.e., Loews Corp and Orix Corp go up and down completely randomly.

Pair Corralation between Loews Corp and Orix Corp

Taking into account the 90-day investment horizon Loews Corp is expected to generate 0.59 times more return on investment than Orix Corp. However, Loews Corp is 1.68 times less risky than Orix Corp. It trades about -0.08 of its potential returns per unit of risk. Orix Corp Ads is currently generating about -0.12 per unit of risk. If you would invest  8,639  in Loews Corp on November 28, 2024 and sell it today you would lose (140.00) from holding Loews Corp or give up 1.62% of portfolio value over 90 days.

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

Loews Corp  vs.  Orix Corp Ads

Loews Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Loews Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Loews Corp is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Orix Corp Ads

Risk-Adjusted Performance

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 weak 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.

Pair Trading with Loews Corp and Orix Corp

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

The idea behind Loews Corp and Orix Corp Ads 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.