Correlation Between ORIX and MHP Hotel

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

By analyzing existing cross correlation between ORIX Corporation and MHP Hotel AG, you can compare the effects of market volatilities on ORIX and MHP Hotel 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 MHP Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of ORIX and MHP Hotel.

Diversification Opportunities for ORIX and MHP Hotel

0.15

Correlation Coefficient

ORIX  MHP Hotel

Average diversification

The 3 months correlation between ORIX and MHP is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding ORIX Corp. and MHP Hotel AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MHP Hotel AG 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 MHP Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MHP Hotel AG has no effect on the direction of ORIX i.e., ORIX and MHP Hotel go up and down completely randomly.

Pair Corralation between ORIX and MHP Hotel

Assuming the 90 days horizon ORIX Corporation is expected to under-perform the MHP Hotel. But the stock apears to be less risky and, when comparing its historical volatility, ORIX Corporation is 1.62 times less risky than MHP Hotel. The stock trades about -0.06 of its potential returns per unit of risk. The MHP Hotel AG is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  111.00  in MHP Hotel AG on September 26, 2024 and sell it today you would earn a total of  7.00  from holding MHP Hotel AG or generate 6.31% return on investment over 90 days.

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

ORIX Corp.  vs.  MHP Hotel AG

ORIX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ORIX Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

MHP Hotel AG

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MHP Hotel AG are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, MHP Hotel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ORIX and MHP Hotel

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

The idea behind ORIX Corporation and MHP Hotel AG 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.