Correlation Between Orient Rental and Metropolitan Steel

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

Diversification Opportunities for Orient Rental and Metropolitan Steel

-0.1

Correlation Coefficient

Orient Rental  Metropolitan Steel

Good diversification

The 3 months correlation between Orient and Metropolitan is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Orient Rental Modaraba and Metropolitan Steel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan Steel Corp 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 Metropolitan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metropolitan Steel Corp has no effect on the direction of Orient Rental i.e., Orient Rental and Metropolitan Steel go up and down completely randomly.

Pair Corralation between Orient Rental and Metropolitan Steel

Assuming the 90 days trading horizon Orient Rental Modaraba is expected to generate 0.94 times more return on investment than Metropolitan Steel. However, Orient Rental Modaraba is 1.06 times less risky than Metropolitan Steel. It trades about 0.06 of its potential returns per unit of risk. Metropolitan Steel Corp is currently generating about -0.03 per unit of risk. If you would invest  739.00  in Orient Rental Modaraba on October 25, 2024 and sell it today you would earn a total of  63.00  from holding Orient Rental Modaraba or generate 8.53% return on investment over 90 days.

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

Orient Rental Modaraba  vs.  Metropolitan Steel Corp

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.

Metropolitan Steel Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metropolitan Steel Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Metropolitan Steel is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Orient Rental and Metropolitan Steel

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

The idea behind Orient Rental Modaraba and Metropolitan Steel Corp 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.