Correlation Between Shaheen Insurance and Orient Rental

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

By analyzing existing cross correlation between Shaheen Insurance and Orient Rental Modaraba, you can compare the effects of market volatilities on Shaheen Insurance 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 Shaheen Insurance with a short position of Orient Rental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shaheen Insurance and Orient Rental.

Diversification Opportunities for Shaheen Insurance and Orient Rental

0.73

Correlation Coefficient

Shaheen Insurance  Orient Rental

Poor diversification

The 3 months correlation between Shaheen and Orient is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Shaheen Insurance 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 Shaheen Insurance 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 Shaheen Insurance 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 Shaheen Insurance i.e., Shaheen Insurance and Orient Rental go up and down completely randomly.

Pair Corralation between Shaheen Insurance and Orient Rental

Assuming the 90 days trading horizon Shaheen Insurance is expected to generate 1.28 times less return on investment than Orient Rental. But when comparing it to its historical volatility, Shaheen Insurance is 1.13 times less risky than Orient Rental. It trades about 0.16 of its potential returns per unit of risk. Orient Rental Modaraba is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  595.00  in Orient Rental Modaraba on September 15, 2024 and sell it today you would earn a total of  240.00  from holding Orient Rental Modaraba or generate 40.34% return on investment over 90 days.

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

Shaheen Insurance  vs.  Orient Rental Modaraba

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 conflicting basic indicators, Shaheen Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Shaheen Insurance and Orient Rental

The main advantage of trading using opposite Shaheen Insurance and Orient Rental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shaheen Insurance 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 Shaheen Insurance 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.