Correlation Between Orix Corp and MHP Hotel

Can any of the company-specific risk be diversified away by investing in both Orix Corp and MHP Hotel 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 MHP Hotel 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 MHP Hotel AG, you can compare the effects of market volatilities on Orix Corp and MHP Hotel 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 MHP Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orix Corp and MHP Hotel.

Diversification Opportunities for Orix Corp and MHP Hotel

0.19

Correlation Coefficient

Orix Corp  MHP Hotel

Average diversification

The 3 months correlation between Orix and MHP is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Orix Corp Ads and MHP Hotel AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MHP Hotel AG 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 MHP Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MHP Hotel AG has no effect on the direction of Orix Corp i.e., Orix Corp and MHP Hotel go up and down completely randomly.

Pair Corralation between Orix Corp and MHP Hotel

Assuming the 90 days trading horizon Orix Corp Ads is expected to generate 0.86 times more return on investment than MHP Hotel. However, Orix Corp Ads is 1.16 times less risky than MHP Hotel. It trades about 0.05 of its potential returns per unit of risk. MHP Hotel AG is currently generating about 0.02 per unit of risk. If you would invest  7,847  in Orix Corp Ads on September 23, 2024 and sell it today you would earn a total of  2,053  from holding Orix Corp Ads or generate 26.16% return on investment over 90 days.

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

Orix Corp Ads  vs.  MHP Hotel AG

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. Despite nearly stable basic indicators, Orix Corp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

MHP Hotel AG

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Orix Corp and MHP Hotel

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

The idea behind Orix Corp Ads and MHP Hotel AG 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.