Correlation Between Ghani Gases and Orient Rental

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

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

Diversification Opportunities for Ghani Gases and Orient Rental

0.72

Correlation Coefficient

Ghani Gases  Orient Rental

Poor diversification

The 3 months correlation between Ghani and Orient is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Ghani Gases 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 Ghani Gases 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 Ghani Gases 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 Ghani Gases i.e., Ghani Gases and Orient Rental go up and down completely randomly.

Pair Corralation between Ghani Gases and Orient Rental

Assuming the 90 days trading horizon Ghani Gases is expected to generate 2.49 times more return on investment than Orient Rental. However, Ghani Gases is 2.49 times more volatile than Orient Rental Modaraba. It trades about 0.28 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  1,220  in Ghani Gases on October 6, 2024 and sell it today you would earn a total of  370.00  from holding Ghani Gases or generate 30.33% return on investment over 90 days.

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

Ghani Gases  vs.  Orient Rental Modaraba

Ghani Gases

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ghani Gases are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Ghani Gases reported solid returns over the last few months and may actually be approaching a breakup point.

Orient Rental Modaraba

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Orient Rental Modaraba are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Orient Rental reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ghani Gases and Orient Rental

The main advantage of trading using opposite Ghani Gases and Orient Rental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ghani Gases 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 Ghani Gases 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.

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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.