Correlation Between ORIX Leasing and IGI Life

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

Diversification Opportunities for ORIX Leasing and IGI Life

0.69

Correlation Coefficient

ORIX Leasing  IGI Life

Poor diversification

The 3 months correlation between ORIX and IGI is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding ORIX Leasing Pakistan and IGI Life Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IGI Life 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 IGI Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IGI Life Insurance has no effect on the direction of ORIX Leasing i.e., ORIX Leasing and IGI Life go up and down completely randomly.

Pair Corralation between ORIX Leasing and IGI Life

Assuming the 90 days trading horizon ORIX Leasing Pakistan is expected to generate 0.75 times more return on investment than IGI Life. However, ORIX Leasing Pakistan is 1.34 times less risky than IGI Life. It trades about 0.17 of its potential returns per unit of risk. IGI Life Insurance is currently generating about 0.01 per unit of risk. If you would invest  2,905  in ORIX Leasing Pakistan on October 25, 2024 and sell it today you would earn a total of  740.00  from holding ORIX Leasing Pakistan or generate 25.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.08%
Values	Daily Returns

ORIX Leasing Pakistan  vs.  IGI Life Insurance

ORIX Leasing Pakistan

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ORIX Leasing Pakistan are ranked lower than 13 (%) 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.

IGI Life Insurance

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IGI Life Insurance are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, IGI Life is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ORIX Leasing and IGI Life

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

The idea behind ORIX Leasing Pakistan and IGI Life 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.