Correlation Between ORIX Leasing and Pakistan Cables

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

Diversification Opportunities for ORIX Leasing and Pakistan Cables

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between ORIX and Pakistan is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding ORIX Leasing Pakistan and Pakistan Cables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Cables 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 Pakistan Cables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Cables has no effect on the direction of ORIX Leasing i.e., ORIX Leasing and Pakistan Cables go up and down completely randomly.

Pair Corralation between ORIX Leasing and Pakistan Cables

Assuming the 90 days trading horizon ORIX Leasing is expected to generate 2.67 times less return on investment than Pakistan Cables. But when comparing it to its historical volatility, ORIX Leasing Pakistan is 2.0 times less risky than Pakistan Cables. It trades about 0.13 of its potential returns per unit of risk. Pakistan Cables is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  15,006  in Pakistan Cables on October 8, 2024 and sell it today you would earn a total of  2,405  from holding Pakistan Cables or generate 16.03% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

ORIX Leasing Pakistan  vs.  Pakistan Cables

 Performance 
       Timeline  
ORIX Leasing Pakistan 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
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.
Pakistan Cables 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Cables are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Pakistan Cables sustained solid returns over the last few months and may actually be approaching a breakup point.

ORIX Leasing and Pakistan Cables Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ORIX Leasing and Pakistan Cables

The main advantage of trading using opposite ORIX Leasing and Pakistan Cables positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ORIX Leasing position performs unexpectedly, Pakistan Cables 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 Pakistan Cables will offset losses from the drop in Pakistan Cables' long position.
The idea behind ORIX Leasing Pakistan and Pakistan Cables 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.

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