Correlation Between ORIX and Mastercard

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

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

Diversification Opportunities for ORIX and Mastercard

-0.25

Correlation Coefficient

ORIX  Mastercard

Very good diversification

The 3 months correlation between ORIX and Mastercard is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding ORIX Corp. and Mastercard in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard 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 Mastercard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mastercard has no effect on the direction of ORIX i.e., ORIX and Mastercard go up and down completely randomly.

Pair Corralation between ORIX and Mastercard

Assuming the 90 days horizon ORIX Corporation is expected to under-perform the Mastercard. In addition to that, ORIX is 1.64 times more volatile than Mastercard. It trades about -0.02 of its total potential returns per unit of risk. Mastercard is currently generating about 0.18 per unit of volatility. If you would invest  48,406  in Mastercard on November 20, 2024 and sell it today you would earn a total of  5,594  from holding Mastercard or generate 11.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

ORIX Corp.  vs.  Mastercard

ORIX

Risk-Adjusted Performance

Very 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.

Mastercard

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Mastercard may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with ORIX and Mastercard

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

The idea behind ORIX Corporation and Mastercard 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.