Correlation Between Orient Rental and Hub Power

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

Diversification Opportunities for Orient Rental and Hub Power

0.59

Correlation Coefficient

Orient Rental  Hub Power

Very weak diversification

The 3 months correlation between Orient and Hub is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Orient Rental Modaraba and Hub Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hub Power 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 Hub Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hub Power has no effect on the direction of Orient Rental i.e., Orient Rental and Hub Power go up and down completely randomly.

Pair Corralation between Orient Rental and Hub Power

Assuming the 90 days trading horizon Orient Rental is expected to generate 6.84 times less return on investment than Hub Power. But when comparing it to its historical volatility, Orient Rental Modaraba is 1.17 times less risky than Hub Power. It trades about 0.02 of its potential returns per unit of risk. Hub Power is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  13,413  in Hub Power on October 23, 2024 and sell it today you would earn a total of  406.00  from holding Hub Power or generate 3.03% return on investment over 90 days.

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

Orient Rental Modaraba  vs.  Hub Power

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.

Hub Power

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hub Power are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hub Power sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Orient Rental and Hub Power

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

The idea behind Orient Rental Modaraba and Hub Power 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 .