Correlation Between ORIX and PT Charoen

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

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

Diversification Opportunities for ORIX and PT Charoen

-0.33

Correlation Coefficient

ORIX  PT Charoen

Very good diversification

The 3 months correlation between ORIX and 0CP1 is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding ORIX Corp. and PT Charoen Pokphand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Charoen Pokphand and ORIX 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 Corporation are associated (or correlated) with PT Charoen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Charoen Pokphand has no effect on the direction of ORIX i.e., ORIX and PT Charoen go up and down completely randomly.

Pair Corralation between ORIX and PT Charoen

Assuming the 90 days horizon ORIX Corporation is expected to under-perform the PT Charoen. But the stock apears to be less risky and, when comparing its historical volatility, ORIX Corporation is 2.42 times less risky than PT Charoen. The stock trades about -0.16 of its potential returns per unit of risk. The PT Charoen Pokphand is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  27.00  in PT Charoen Pokphand on October 5, 2024 and sell it today you would earn a total of  0.00  from holding PT Charoen Pokphand or generate 0.0% return on investment over 90 days.

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

ORIX Corp.  vs.  PT Charoen Pokphand

ORIX

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days ORIX Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ORIX is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

PT Charoen Pokphand

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days PT Charoen Pokphand has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PT Charoen is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ORIX and PT Charoen

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

The idea behind ORIX Corporation and PT Charoen Pokphand 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.