Correlation Between Orient Rental and Engro Polymer

Can any of the company-specific risk be diversified away by investing in both Orient Rental and Engro Polymer 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 Engro Polymer 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 Engro Polymer Chemicals, you can compare the effects of market volatilities on Orient Rental and Engro Polymer 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 Engro Polymer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orient Rental and Engro Polymer.

Diversification Opportunities for Orient Rental and Engro Polymer

-0.07

Correlation Coefficient

Orient Rental  Engro Polymer

Good diversification

The 3 months correlation between Orient and Engro is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Orient Rental Modaraba and Engro Polymer Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Engro Polymer Chemicals 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 Engro Polymer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Engro Polymer Chemicals has no effect on the direction of Orient Rental i.e., Orient Rental and Engro Polymer go up and down completely randomly.

Pair Corralation between Orient Rental and Engro Polymer

Assuming the 90 days trading horizon Orient Rental is expected to generate 3.67 times less return on investment than Engro Polymer. In addition to that, Orient Rental is 1.53 times more volatile than Engro Polymer Chemicals. It trades about 0.03 of its total potential returns per unit of risk. Engro Polymer Chemicals is currently generating about 0.17 per unit of volatility. If you would invest  3,399  in Engro Polymer Chemicals on December 5, 2024 and sell it today you would earn a total of  321.00  from holding Engro Polymer Chemicals or generate 9.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

Orient Rental Modaraba  vs.  Engro Polymer Chemicals

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.

Engro Polymer Chemicals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Engro Polymer Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Orient Rental and Engro Polymer

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

The idea behind Orient Rental Modaraba and Engro Polymer Chemicals 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.