Correlation Between Orient Rental and Shaheen Insurance

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

Diversification Opportunities for Orient Rental and Shaheen Insurance

0.79

Correlation Coefficient

Orient Rental  Shaheen Insurance

Poor diversification

The 3 months correlation between Orient and Shaheen is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Orient Rental Modaraba and Shaheen Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shaheen Insurance 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 Shaheen Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shaheen Insurance has no effect on the direction of Orient Rental i.e., Orient Rental and Shaheen Insurance go up and down completely randomly.

Pair Corralation between Orient Rental and Shaheen Insurance

Assuming the 90 days trading horizon Orient Rental is expected to generate 2.73 times less return on investment than Shaheen Insurance. In addition to that, Orient Rental is 1.14 times more volatile than Shaheen Insurance. It trades about 0.08 of its total potential returns per unit of risk. Shaheen Insurance is currently generating about 0.24 per unit of volatility. If you would invest  523.00  in Shaheen Insurance on September 15, 2024 and sell it today you would earn a total of  83.00  from holding Shaheen Insurance or generate 15.87% return on investment over 90 days.

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

Orient Rental Modaraba  vs.  Shaheen Insurance

Orient Rental Modaraba

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Orient Rental Modaraba are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Orient Rental reported solid returns over the last few months and may actually be approaching a breakup point.

Shaheen Insurance

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Orient Rental and Shaheen Insurance

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

The idea behind Orient Rental Modaraba and Shaheen Insurance 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.