Correlation Between Orix Corp and World Acceptance

Can any of the company-specific risk be diversified away by investing in both Orix Corp and World Acceptance 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 Corp and World Acceptance into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Orix Corp Ads and World Acceptance, you can compare the effects of market volatilities on Orix Corp and World Acceptance 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 Corp with a short position of World Acceptance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orix Corp and World Acceptance.

Diversification Opportunities for Orix Corp and World Acceptance

0.28

Correlation Coefficient

Orix Corp  World Acceptance

Modest diversification

The 3 months correlation between Orix and World is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Orix Corp Ads and World Acceptance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Acceptance and Orix Corp 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 Corp Ads are associated (or correlated) with World Acceptance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Acceptance has no effect on the direction of Orix Corp i.e., Orix Corp and World Acceptance go up and down completely randomly.

Pair Corralation between Orix Corp and World Acceptance

Allowing for the 90-day total investment horizon Orix Corp Ads is expected to under-perform the World Acceptance. But the stock apears to be less risky and, when comparing its historical volatility, Orix Corp Ads is 1.53 times less risky than World Acceptance. The stock trades about -0.1 of its potential returns per unit of risk. The World Acceptance is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  11,316  in World Acceptance on October 1, 2024 and sell it today you would lose (243.00) from holding World Acceptance or give up 2.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Orix Corp Ads  vs.  World Acceptance

Orix Corp Ads

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orix Corp Ads has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

World Acceptance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days World Acceptance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, World Acceptance is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Orix Corp and World Acceptance

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

The idea behind Orix Corp Ads and World Acceptance 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.