Correlation Between Orix Corp and Tsingtao Brewery

Can any of the company-specific risk be diversified away by investing in both Orix Corp and Tsingtao Brewery 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 Tsingtao Brewery 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 Tsingtao Brewery, you can compare the effects of market volatilities on Orix Corp and Tsingtao Brewery 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 Tsingtao Brewery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orix Corp and Tsingtao Brewery.

Diversification Opportunities for Orix Corp and Tsingtao Brewery

0.07

Correlation Coefficient

Orix Corp  Tsingtao Brewery

Significant diversification

The 3 months correlation between Orix and Tsingtao is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Orix Corp Ads and Tsingtao Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsingtao Brewery 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 Tsingtao Brewery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tsingtao Brewery has no effect on the direction of Orix Corp i.e., Orix Corp and Tsingtao Brewery go up and down completely randomly.

Pair Corralation between Orix Corp and Tsingtao Brewery

Assuming the 90 days trading horizon Orix Corp Ads is expected to generate 26.86 times more return on investment than Tsingtao Brewery. However, Orix Corp is 26.86 times more volatile than Tsingtao Brewery. It trades about 0.1 of its potential returns per unit of risk. Tsingtao Brewery is currently generating about -0.03 per unit of risk. If you would invest  2,020  in Orix Corp Ads on December 30, 2024 and sell it today you would lose (100.00) from holding Orix Corp Ads or give up 4.95% of portfolio value over 90 days.

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

Orix Corp Ads  vs.  Tsingtao Brewery

Orix Corp Ads

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Orix Corp Ads are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Orix Corp reported solid returns over the last few months and may actually be approaching a breakup point.

Tsingtao Brewery

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tsingtao Brewery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Tsingtao Brewery is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Orix Corp and Tsingtao Brewery

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

The idea behind Orix Corp Ads and Tsingtao Brewery 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.

Check out your portfolio center.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.