Correlation Between ORIX Leasing and First Fidelity

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

Diversification Opportunities for ORIX Leasing and First Fidelity

0.58

Correlation Coefficient

ORIX Leasing  First Fidelity

Very weak diversification

The 3 months correlation between ORIX and First is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding ORIX Leasing Pakistan and First Fidelity Leasing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Fidelity Leasing 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 First Fidelity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Fidelity Leasing has no effect on the direction of ORIX Leasing i.e., ORIX Leasing and First Fidelity go up and down completely randomly.

Pair Corralation between ORIX Leasing and First Fidelity

Assuming the 90 days trading horizon ORIX Leasing Pakistan is expected to generate 0.4 times more return on investment than First Fidelity. However, ORIX Leasing Pakistan is 2.5 times less risky than First Fidelity. It trades about -0.06 of its potential returns per unit of risk. First Fidelity Leasing is currently generating about -0.04 per unit of risk. If you would invest  3,809  in ORIX Leasing Pakistan on December 22, 2024 and sell it today you would lose (199.00) from holding ORIX Leasing Pakistan or give up 5.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.44%
Values	Daily Returns

ORIX Leasing Pakistan  vs.  First Fidelity Leasing

ORIX Leasing Pakistan

Risk-Adjusted Performance

Very Weak

Over the last 90 days ORIX Leasing Pakistan has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ORIX Leasing is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

First Fidelity Leasing

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Fidelity Leasing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with ORIX Leasing and First Fidelity

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

The idea behind ORIX Leasing Pakistan and First Fidelity Leasing 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.