Correlation Between Pakistan Telecommunicatio and Orient Rental

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

By analyzing existing cross correlation between Pakistan Telecommunication and Orient Rental Modaraba, you can compare the effects of market volatilities on Pakistan Telecommunicatio and Orient Rental 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 Orient Rental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Telecommunicatio and Orient Rental.

Diversification Opportunities for Pakistan Telecommunicatio and Orient Rental

0.76

Correlation Coefficient

Pakistan Telecommunicatio  Orient Rental

Poor diversification

The 3 months correlation between Pakistan and Orient is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Telecommunication and Orient Rental Modaraba in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orient Rental Modaraba 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 Orient Rental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orient Rental Modaraba has no effect on the direction of Pakistan Telecommunicatio i.e., Pakistan Telecommunicatio and Orient Rental go up and down completely randomly.

Pair Corralation between Pakistan Telecommunicatio and Orient Rental

Assuming the 90 days trading horizon Pakistan Telecommunication is expected to under-perform the Orient Rental. In addition to that, Pakistan Telecommunicatio is 1.43 times more volatile than Orient Rental Modaraba. It trades about -0.24 of its total potential returns per unit of risk. Orient Rental Modaraba is currently generating about 0.02 per unit of volatility. If you would invest  798.00  in Orient Rental Modaraba on October 23, 2024 and sell it today you would earn a total of  2.00  from holding Orient Rental Modaraba or generate 0.25% return on investment over 90 days.

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

Pakistan Telecommunication  vs.  Orient Rental Modaraba

Pakistan Telecommunicatio

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Telecommunication are ranked lower than 15 (%) 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.

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.

Pair Trading with Pakistan Telecommunicatio and Orient Rental

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

The idea behind Pakistan Telecommunication and Orient Rental Modaraba 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.