Correlation Between Ittehad Chemicals and Orient Rental

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

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

Diversification Opportunities for Ittehad Chemicals and Orient Rental

0.29

Correlation Coefficient

Ittehad Chemicals  Orient Rental

Modest diversification

The 3 months correlation between Ittehad and Orient is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Ittehad Chemicals 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 Ittehad Chemicals 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 Ittehad Chemicals 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 Ittehad Chemicals i.e., Ittehad Chemicals and Orient Rental go up and down completely randomly.

Pair Corralation between Ittehad Chemicals and Orient Rental

Assuming the 90 days trading horizon Ittehad Chemicals is expected to under-perform the Orient Rental. But the stock apears to be less risky and, when comparing its historical volatility, Ittehad Chemicals is 2.93 times less risky than Orient Rental. The stock trades about -0.02 of its potential returns per unit of risk. The Orient Rental Modaraba is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  804.00  in Orient Rental Modaraba on December 5, 2024 and sell it today you would earn a total of  7.00  from holding Orient Rental Modaraba or generate 0.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.48%
Values	Daily Returns

Ittehad Chemicals  vs.  Orient Rental Modaraba

Ittehad Chemicals

Risk-Adjusted Performance

Modest

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

Orient Rental Modaraba

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Orient Rental Modaraba are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Orient Rental is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Ittehad Chemicals and Orient Rental

The main advantage of trading using opposite Ittehad Chemicals and Orient Rental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ittehad Chemicals 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 Ittehad Chemicals 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.