Correlation Between ORIX and Universal Health

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

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

Diversification Opportunities for ORIX and Universal Health

0.25

Correlation Coefficient

ORIX  Universal Health

Modest diversification

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

Pair Corralation between ORIX and Universal Health

Assuming the 90 days horizon ORIX Corporation is expected to under-perform the Universal Health. In addition to that, ORIX is 1.91 times more volatile than Universal Health Realty. It trades about -0.08 of its total potential returns per unit of risk. Universal Health Realty is currently generating about 0.12 per unit of volatility. If you would invest  3,727  in Universal Health Realty on December 4, 2024 and sell it today you would earn a total of  90.00  from holding Universal Health Realty or generate 2.41% return on investment over 90 days.

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

ORIX Corp.  vs.  Universal Health Realty

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 latest fragile 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.

Universal Health Realty

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Health Realty are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Universal Health 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 Universal Health

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

The idea behind ORIX Corporation and Universal Health Realty 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.