Correlation Between ORIX Leasing and Premier Insurance

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

Diversification Opportunities for ORIX Leasing and Premier Insurance

-0.24

Correlation Coefficient

ORIX Leasing  Premier Insurance

Very good diversification

The 3 months correlation between ORIX and Premier is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding ORIX Leasing Pakistan and Premier Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier 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 Premier Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Insurance has no effect on the direction of ORIX Leasing i.e., ORIX Leasing and Premier Insurance go up and down completely randomly.

Pair Corralation between ORIX Leasing and Premier Insurance

Assuming the 90 days trading horizon ORIX Leasing Pakistan is expected to generate 1.35 times more return on investment than Premier Insurance. However, ORIX Leasing is 1.35 times more volatile than Premier Insurance. It trades about -0.06 of its potential returns per unit of risk. Premier Insurance is currently generating about -0.12 per unit of risk. If you would invest  3,750  in ORIX Leasing Pakistan on October 25, 2024 and sell it today you would lose (105.00) from holding ORIX Leasing Pakistan or give up 2.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

ORIX Leasing Pakistan  vs.  Premier 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.

Premier Insurance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Premier Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Premier Insurance 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 Premier Insurance

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

The idea behind ORIX Leasing Pakistan and Premier 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.