Correlation Between ORIX and BW OFFSHORE

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

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

Diversification Opportunities for ORIX and BW OFFSHORE

-0.61

Correlation Coefficient

ORIX  BW OFFSHORE

Excellent diversification

The 3 months correlation between ORIX and XY81 is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding ORIX Corp. and BW OFFSHORE LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW OFFSHORE LTD 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 BW OFFSHORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW OFFSHORE LTD has no effect on the direction of ORIX i.e., ORIX and BW OFFSHORE go up and down completely randomly.

Pair Corralation between ORIX and BW OFFSHORE

Assuming the 90 days horizon ORIX Corporation is expected to generate 0.7 times more return on investment than BW OFFSHORE. However, ORIX Corporation is 1.44 times less risky than BW OFFSHORE. It trades about 0.16 of its potential returns per unit of risk. BW OFFSHORE LTD is currently generating about -0.06 per unit of risk. If you would invest  1,950  in ORIX Corporation on September 4, 2024 and sell it today you would earn a total of  150.00  from holding ORIX Corporation or generate 7.69% 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.  BW OFFSHORE LTD

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.

BW OFFSHORE LTD

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BW OFFSHORE LTD are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BW OFFSHORE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ORIX and BW OFFSHORE

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

The idea behind ORIX Corporation and BW OFFSHORE LTD 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.