Correlation Between Orient Rental and Allied Bank

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

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

Diversification Opportunities for Orient Rental and Allied Bank

-0.11

Correlation Coefficient

Orient Rental  Allied Bank

Good diversification

The 3 months correlation between Orient and Allied is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Orient Rental Modaraba and Allied Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allied Bank and Orient Rental 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 Orient Rental Modaraba are associated (or correlated) with Allied Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allied Bank has no effect on the direction of Orient Rental i.e., Orient Rental and Allied Bank go up and down completely randomly.

Pair Corralation between Orient Rental and Allied Bank

Assuming the 90 days trading horizon Orient Rental Modaraba is expected to generate 1.28 times more return on investment than Allied Bank. However, Orient Rental is 1.28 times more volatile than Allied Bank. It trades about 0.03 of its potential returns per unit of risk. Allied Bank is currently generating about -0.05 per unit of risk. If you would invest  789.00  in Orient Rental Modaraba on December 5, 2024 and sell it today you would earn a total of  22.00  from holding Orient Rental Modaraba or generate 2.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

Orient Rental Modaraba  vs.  Allied Bank

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.

Allied Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Allied Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest conflicting performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Orient Rental and Allied Bank

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

The idea behind Orient Rental Modaraba and Allied Bank 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .