Correlation Between Big Bird and Orient Rental

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

By analyzing existing cross correlation between Big Bird Foods and Orient Rental Modaraba, you can compare the effects of market volatilities on Big Bird and Orient Rental 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 Big Bird with a short position of Orient Rental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big Bird and Orient Rental.

Diversification Opportunities for Big Bird and Orient Rental

-0.63

Correlation Coefficient

Big Bird  Orient Rental

Excellent diversification

The 3 months correlation between Big and Orient is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Big Bird Foods and Orient Rental Modaraba in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orient Rental Modaraba and Big Bird 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 Big Bird Foods are associated (or correlated) with Orient Rental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orient Rental Modaraba has no effect on the direction of Big Bird i.e., Big Bird and Orient Rental go up and down completely randomly.

Pair Corralation between Big Bird and Orient Rental

Assuming the 90 days trading horizon Big Bird Foods is expected to generate 2.77 times more return on investment than Orient Rental. However, Big Bird is 2.77 times more volatile than Orient Rental Modaraba. It trades about 0.06 of its potential returns per unit of risk. Orient Rental Modaraba is currently generating about 0.04 per unit of risk. If you would invest  4,910  in Big Bird Foods on October 25, 2024 and sell it today you would earn a total of  180.00  from holding Big Bird Foods or generate 3.67% return on investment over 90 days.

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

Big Bird Foods  vs.  Orient Rental Modaraba

Big Bird Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big Bird Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Orient Rental Modaraba

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Orient Rental Modaraba are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Orient Rental may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Big Bird and Orient Rental

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

The idea behind Big Bird Foods and Orient Rental Modaraba 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.

Check out your portfolio center.

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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.