Correlation Between Orix Corp and Advanced Drainage

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

By analyzing existing cross correlation between Orix Corp Ads and Advanced Drainage Systems, you can compare the effects of market volatilities on Orix Corp and Advanced Drainage 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 Corp with a short position of Advanced Drainage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orix Corp and Advanced Drainage.

Diversification Opportunities for Orix Corp and Advanced Drainage

-0.33

Correlation Coefficient

Orix Corp  Advanced Drainage

Very good diversification

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

Pair Corralation between Orix Corp and Advanced Drainage

Assuming the 90 days trading horizon Orix Corp is expected to generate 1.17 times less return on investment than Advanced Drainage. But when comparing it to its historical volatility, Orix Corp Ads is 1.26 times less risky than Advanced Drainage. It trades about 0.05 of its potential returns per unit of risk. Advanced Drainage Systems is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  7,359  in Advanced Drainage Systems on October 5, 2024 and sell it today you would earn a total of  3,751  from holding Advanced Drainage Systems or generate 50.97% return on investment over 90 days.

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

Orix Corp Ads  vs.  Advanced Drainage Systems

Orix Corp Ads

Risk-Adjusted Performance

0 of 100

Weak

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

Advanced Drainage Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced Drainage Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Orix Corp and Advanced Drainage

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

The idea behind Orix Corp Ads and Advanced Drainage Systems 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.