Correlation Between ORIX Leasing and Sitara Chemical

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

By analyzing existing cross correlation between ORIX Leasing Pakistan and Sitara Chemical Industries, you can compare the effects of market volatilities on ORIX Leasing and Sitara Chemical 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 Leasing with a short position of Sitara Chemical. Check out your portfolio center. Please also check ongoing floating volatility patterns of ORIX Leasing and Sitara Chemical.

Diversification Opportunities for ORIX Leasing and Sitara Chemical

0.62

Correlation Coefficient

ORIX Leasing  Sitara Chemical

Poor diversification

The 3 months correlation between ORIX and Sitara is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding ORIX Leasing Pakistan and Sitara Chemical Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sitara Chemical Indu and ORIX Leasing 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 Leasing Pakistan are associated (or correlated) with Sitara Chemical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sitara Chemical Indu has no effect on the direction of ORIX Leasing i.e., ORIX Leasing and Sitara Chemical go up and down completely randomly.

Pair Corralation between ORIX Leasing and Sitara Chemical

Assuming the 90 days trading horizon ORIX Leasing Pakistan is expected to generate 0.71 times more return on investment than Sitara Chemical. However, ORIX Leasing Pakistan is 1.4 times less risky than Sitara Chemical. It trades about 0.26 of its potential returns per unit of risk. Sitara Chemical Industries is currently generating about 0.09 per unit of risk. If you would invest  2,532  in ORIX Leasing Pakistan on September 12, 2024 and sell it today you would earn a total of  868.00  from holding ORIX Leasing Pakistan or generate 34.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

ORIX Leasing Pakistan  vs.  Sitara Chemical Industries

ORIX Leasing Pakistan

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ORIX Leasing Pakistan are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, ORIX Leasing sustained solid returns over the last few months and may actually be approaching a breakup point.

Sitara Chemical Indu

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sitara Chemical Industries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sitara Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ORIX Leasing and Sitara Chemical

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

The idea behind ORIX Leasing Pakistan and Sitara Chemical Industries 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.