Correlation Between Orient Rental and Wah Nobel

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

Diversification Opportunities for Orient Rental and Wah Nobel

0.56
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Orient and Wah is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Orient Rental Modaraba and Wah Nobel Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wah Nobel 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 Wah Nobel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wah Nobel Chemicals has no effect on the direction of Orient Rental i.e., Orient Rental and Wah Nobel go up and down completely randomly.

Pair Corralation between Orient Rental and Wah Nobel

Assuming the 90 days trading horizon Orient Rental Modaraba is expected to generate 0.57 times more return on investment than Wah Nobel. However, Orient Rental Modaraba is 1.75 times less risky than Wah Nobel. It trades about 0.04 of its potential returns per unit of risk. Wah Nobel Chemicals is currently generating about -0.5 per unit of risk. If you would invest  795.00  in Orient Rental Modaraba on October 25, 2024 and sell it today you would earn a total of  7.00  from holding Orient Rental Modaraba or generate 0.88% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Orient Rental Modaraba  vs.  Wah Nobel Chemicals

 Performance 
       Timeline  
Orient Rental Modaraba 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
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.
Wah Nobel Chemicals 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Wah Nobel Chemicals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Wah Nobel may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Orient Rental and Wah Nobel Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Orient Rental and Wah Nobel

The main advantage of trading using opposite Orient Rental and Wah Nobel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orient Rental position performs unexpectedly, Wah Nobel 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 Wah Nobel will offset losses from the drop in Wah Nobel's long position.
The idea behind Orient Rental Modaraba and Wah Nobel 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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