Correlation Between Orix Corp and CARSALES

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

Diversification Opportunities for Orix Corp and CARSALES

-0.03

Correlation Coefficient

Orix Corp  CARSALES

Good diversification

The 3 months correlation between Orix and CARSALES is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Orix Corp Ads and CARSALESCOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARSALESCOM 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 CARSALES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARSALESCOM has no effect on the direction of Orix Corp i.e., Orix Corp and CARSALES go up and down completely randomly.

Pair Corralation between Orix Corp and CARSALES

Assuming the 90 days trading horizon Orix Corp Ads is expected to generate 28.64 times more return on investment than CARSALES. However, Orix Corp is 28.64 times more volatile than CARSALESCOM. It trades about 0.1 of its potential returns per unit of risk. CARSALESCOM is currently generating about -0.12 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 Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Orix Corp Ads  vs.  CARSALESCOM

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.

CARSALESCOM

Risk-Adjusted Performance

Very Weak

Over the last 90 days CARSALESCOM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Orix Corp and CARSALES

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

The idea behind Orix Corp Ads and CARSALESCOM 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.