Correlation Between ORIX and American Express

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

By analyzing existing cross correlation between ORIX Corporation and American Express, you can compare the effects of market volatilities on ORIX and American Express 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 American Express. Check out your portfolio center. Please also check ongoing floating volatility patterns of ORIX and American Express.

Diversification Opportunities for ORIX and American Express

-0.42

Correlation Coefficient

ORIX  American Express

Very good diversification

The 3 months correlation between ORIX and American is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding ORIX Corp. and American Express in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Express 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 American Express. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Express has no effect on the direction of ORIX i.e., ORIX and American Express go up and down completely randomly.

Pair Corralation between ORIX and American Express

Assuming the 90 days horizon ORIX Corporation is expected to under-perform the American Express. In addition to that, ORIX is 1.21 times more volatile than American Express. It trades about -0.04 of its total potential returns per unit of risk. American Express is currently generating about 0.21 per unit of volatility. If you would invest  23,153  in American Express on September 2, 2024 and sell it today you would earn a total of  5,862  from holding American Express or generate 25.32% return on investment over 90 days.

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

ORIX Corp.  vs.  American Express

ORIX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ORIX Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ORIX is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

American Express

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Express are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, American Express exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ORIX and American Express

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

The idea behind ORIX Corporation and American Express 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.