Correlation Between Pakistan Telecommunicatio and ORIX Leasing

Can any of the company-specific risk be diversified away by investing in both Pakistan Telecommunicatio and ORIX Leasing 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 Pakistan Telecommunicatio and ORIX Leasing into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Pakistan Telecommunication and ORIX Leasing Pakistan, you can compare the effects of market volatilities on Pakistan Telecommunicatio and ORIX Leasing 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 Pakistan Telecommunicatio with a short position of ORIX Leasing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Telecommunicatio and ORIX Leasing.

Diversification Opportunities for Pakistan Telecommunicatio and ORIX Leasing

0.95

Correlation Coefficient

Pakistan Telecommunicatio  ORIX Leasing

Almost no diversification

The 3 months correlation between Pakistan and ORIX is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Telecommunication and ORIX Leasing Pakistan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ORIX Leasing Pakistan and Pakistan Telecommunicatio 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 Pakistan Telecommunication are associated (or correlated) with ORIX Leasing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ORIX Leasing Pakistan has no effect on the direction of Pakistan Telecommunicatio i.e., Pakistan Telecommunicatio and ORIX Leasing go up and down completely randomly.

Pair Corralation between Pakistan Telecommunicatio and ORIX Leasing

Assuming the 90 days trading horizon Pakistan Telecommunication is expected to generate 2.25 times more return on investment than ORIX Leasing. However, Pakistan Telecommunicatio is 2.25 times more volatile than ORIX Leasing Pakistan. It trades about 0.1 of its potential returns per unit of risk. ORIX Leasing Pakistan is currently generating about 0.16 per unit of risk. If you would invest  1,246  in Pakistan Telecommunication on October 7, 2024 and sell it today you would earn a total of  1,417  from holding Pakistan Telecommunication or generate 113.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.76%
Values	Daily Returns

Pakistan Telecommunication  vs.  ORIX Leasing Pakistan

Pakistan Telecommunicatio

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Telecommunication are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Pakistan Telecommunicatio reported solid returns over the last few months and may actually be approaching a breakup point.

ORIX Leasing Pakistan

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ORIX Leasing Pakistan are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ORIX Leasing sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pakistan Telecommunicatio and ORIX Leasing

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

The idea behind Pakistan Telecommunication and ORIX Leasing Pakistan 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.