Correlation Between ORIX and New China
Can any of the company-specific risk be diversified away by investing in both ORIX and New China 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 and New China into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ORIX Corporation and New China Life, you can compare the effects of market volatilities on ORIX and New China 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 with a short position of New China. Check out your portfolio center. Please also check ongoing floating volatility patterns of ORIX and New China.
Diversification Opportunities for ORIX and New China
Excellent diversification
The 3 months correlation between ORIX and New is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding ORIX Corp. and New China Life in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New China Life and ORIX 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 Corporation are associated (or correlated) with New China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New China Life has no effect on the direction of ORIX i.e., ORIX and New China go up and down completely randomly.
Pair Corralation between ORIX and New China
Assuming the 90 days horizon ORIX is expected to generate 27.58 times less return on investment than New China. But when comparing it to its historical volatility, ORIX Corporation is 4.14 times less risky than New China. It trades about 0.02 of its potential returns per unit of risk. New China Life is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 74.00 in New China Life on September 2, 2024 and sell it today you would earn a total of 214.00 from holding New China Life or generate 289.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ORIX Corp. vs. New China Life
Performance |
| Timeline |
| ORIX |
| New China Life |
ORIX and New China Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ORIX and New China
The main advantage of trading using opposite ORIX and New China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ORIX position performs unexpectedly, New China 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 New China will offset losses from the drop in New China's long position.| ORIX vs. OURGAME INTHOLDL 00005 | ORIX vs. Autohome ADR | ORIX vs. ANGLER GAMING PLC | ORIX vs. Games Workshop Group |
| New China vs. Geely Automobile Holdings | New China vs. Singapore Telecommunications Limited | New China vs. INTERSHOP Communications Aktiengesellschaft | New China vs. INTER CARS SA |
Check out your portfolio center.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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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