Correlation Between ORIX Leasing and Wah Nobel

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

Diversification Opportunities for ORIX Leasing and Wah Nobel

0.73

Correlation Coefficient

ORIX Leasing  Wah Nobel

Poor diversification

The 3 months correlation between ORIX and Wah is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding ORIX Leasing Pakistan and Wah Nobel Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wah Nobel Chemicals 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 Wah Nobel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wah Nobel Chemicals has no effect on the direction of ORIX Leasing i.e., ORIX Leasing and Wah Nobel go up and down completely randomly.

Pair Corralation between ORIX Leasing and Wah Nobel

Assuming the 90 days trading horizon ORIX Leasing Pakistan is expected to generate 1.01 times more return on investment than Wah Nobel. However, ORIX Leasing is 1.01 times more volatile than Wah Nobel Chemicals. It trades about 0.28 of its potential returns per unit of risk. Wah Nobel Chemicals is currently generating about 0.18 per unit of risk. If you would invest  2,556  in ORIX Leasing Pakistan on September 14, 2024 and sell it today you would earn a total of  993.00  from holding ORIX Leasing Pakistan or generate 38.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

ORIX Leasing Pakistan  vs.  Wah Nobel Chemicals

ORIX Leasing Pakistan

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ORIX Leasing Pakistan are ranked lower than 22 (%) 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.

Wah Nobel Chemicals

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with ORIX Leasing and Wah Nobel

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

The idea behind ORIX Leasing Pakistan and Wah Nobel Chemicals 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 Global Correlations module to find global opportunities by holding instruments from different markets.