Correlation Between Sardar Chemical and ORIX Leasing

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

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

Diversification Opportunities for Sardar Chemical and ORIX Leasing

0.64

Correlation Coefficient

Sardar Chemical  ORIX Leasing

Poor diversification

The 3 months correlation between Sardar and ORIX is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Sardar Chemical Industries 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 Sardar Chemical 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 Sardar Chemical Industries 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 Sardar Chemical i.e., Sardar Chemical and ORIX Leasing go up and down completely randomly.

Pair Corralation between Sardar Chemical and ORIX Leasing

Assuming the 90 days trading horizon Sardar Chemical is expected to generate 1.79 times less return on investment than ORIX Leasing. In addition to that, Sardar Chemical is 1.44 times more volatile than ORIX Leasing Pakistan. It trades about 0.07 of its total potential returns per unit of risk. ORIX Leasing Pakistan is currently generating about 0.17 per unit of volatility. If you would invest  2,905  in ORIX Leasing Pakistan on October 25, 2024 and sell it today you would earn a total of  740.00  from holding ORIX Leasing Pakistan or generate 25.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	77.05%
Values	Daily Returns

Sardar Chemical Industries  vs.  ORIX Leasing Pakistan

Sardar Chemical Indu

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sardar Chemical Industries are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sardar Chemical sustained solid returns over the last few months and may actually be approaching a breakup point.

ORIX Leasing Pakistan

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ORIX Leasing Pakistan are ranked lower than 13 (%) 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 Sardar Chemical and ORIX Leasing

The main advantage of trading using opposite Sardar Chemical and ORIX Leasing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sardar Chemical 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 Sardar Chemical Industries 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.