Correlation Between ORIX and POWER METALS

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

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

Diversification Opportunities for ORIX and POWER METALS

-0.64

Correlation Coefficient

ORIX  POWER METALS

Excellent diversification

The 3 months correlation between ORIX and POWER is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding ORIX Corp. and POWER METALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on POWER METALS 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 POWER METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of POWER METALS has no effect on the direction of ORIX i.e., ORIX and POWER METALS go up and down completely randomly.

Pair Corralation between ORIX and POWER METALS

Assuming the 90 days horizon ORIX Corporation is expected to under-perform the POWER METALS. But the stock apears to be less risky and, when comparing its historical volatility, ORIX Corporation is 4.02 times less risky than POWER METALS. The stock trades about -0.06 of its potential returns per unit of risk. The POWER METALS is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  29.00  in POWER METALS on December 29, 2024 and sell it today you would earn a total of  47.00  from holding POWER METALS or generate 162.07% return on investment over 90 days.

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

ORIX Corp.  vs.  POWER METALS

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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

POWER METALS

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in POWER METALS are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, POWER METALS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ORIX and POWER METALS

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

The idea behind ORIX Corporation and POWER METALS 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.