Correlation Between ORIX Leasing and Adamjee Insurance

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

By analyzing existing cross correlation between ORIX Leasing Pakistan and Adamjee Insurance, you can compare the effects of market volatilities on ORIX Leasing and Adamjee Insurance 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 Leasing with a short position of Adamjee Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of ORIX Leasing and Adamjee Insurance.

Diversification Opportunities for ORIX Leasing and Adamjee Insurance

0.91

Correlation Coefficient

ORIX Leasing  Adamjee Insurance

Almost no diversification

The 3 months correlation between ORIX and Adamjee is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding ORIX Leasing Pakistan and Adamjee Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adamjee Insurance and ORIX Leasing 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 Leasing Pakistan are associated (or correlated) with Adamjee Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adamjee Insurance has no effect on the direction of ORIX Leasing i.e., ORIX Leasing and Adamjee Insurance go up and down completely randomly.

Pair Corralation between ORIX Leasing and Adamjee Insurance

Assuming the 90 days trading horizon ORIX Leasing Pakistan is expected to generate 1.19 times more return on investment than Adamjee Insurance. However, ORIX Leasing is 1.19 times more volatile than Adamjee Insurance. It trades about 0.13 of its potential returns per unit of risk. Adamjee Insurance is currently generating about -0.28 per unit of risk. If you would invest  3,401  in ORIX Leasing Pakistan on October 8, 2024 and sell it today you would earn a total of  207.00  from holding ORIX Leasing Pakistan or generate 6.09% return on investment over 90 days.

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

ORIX Leasing Pakistan  vs.  Adamjee Insurance

ORIX Leasing Pakistan

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ORIX Leasing Pakistan are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ORIX Leasing sustained solid returns over the last few months and may actually be approaching a breakup point.

Adamjee Insurance

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Adamjee Insurance are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Adamjee Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ORIX Leasing and Adamjee Insurance

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

The idea behind ORIX Leasing Pakistan and Adamjee Insurance 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.