Correlation Between National Bank and ORIX Leasing

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

By analyzing existing cross correlation between National Bank of and ORIX Leasing Pakistan, you can compare the effects of market volatilities on National Bank and ORIX Leasing 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 National Bank with a short position of ORIX Leasing. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bank and ORIX Leasing.

Diversification Opportunities for National Bank and ORIX Leasing

0.3

Correlation Coefficient

National Bank  ORIX Leasing

Weak diversification

The 3 months correlation between National and ORIX is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding National Bank of and ORIX Leasing Pakistan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ORIX Leasing Pakistan and National Bank 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 National Bank of are associated (or correlated) with ORIX Leasing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ORIX Leasing Pakistan has no effect on the direction of National Bank i.e., National Bank and ORIX Leasing go up and down completely randomly.

Pair Corralation between National Bank and ORIX Leasing

Assuming the 90 days trading horizon National Bank is expected to generate 22.81 times less return on investment than ORIX Leasing. In addition to that, National Bank is 1.59 times more volatile than ORIX Leasing Pakistan. It trades about 0.01 of its total potential returns per unit of risk. ORIX Leasing Pakistan is currently generating about 0.24 per unit of volatility. If you would invest  2,758  in ORIX Leasing Pakistan on September 28, 2024 and sell it today you would earn a total of  942.00  from holding ORIX Leasing Pakistan or generate 34.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

National Bank of  vs.  ORIX Leasing Pakistan

National Bank

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days National Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, National Bank is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

ORIX Leasing Pakistan

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ORIX Leasing Pakistan are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ORIX Leasing sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Bank and ORIX Leasing

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

The idea behind National Bank of and ORIX Leasing Pakistan 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.