Correlation Between EFU General and Orient Rental
Can any of the company-specific risk be diversified away by investing in both EFU General 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 EFU General and Orient Rental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EFU General Insurance and Orient Rental Modaraba, you can compare the effects of market volatilities on EFU General 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 EFU General with a short position of Orient Rental. Check out your portfolio center. Please also check ongoing floating volatility patterns of EFU General and Orient Rental.
Diversification Opportunities for EFU General and Orient Rental
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between EFU and Orient is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding EFU General 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 EFU General 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 EFU General 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 EFU General i.e., EFU General and Orient Rental go up and down completely randomly.
Pair Corralation between EFU General and Orient Rental
Assuming the 90 days trading horizon EFU General is expected to generate 1.39 times less return on investment than Orient Rental. But when comparing it to its historical volatility, EFU General Insurance is 2.0 times less risky than Orient Rental. It trades about 0.1 of its potential returns per unit of risk. Orient Rental Modaraba is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 437.00 in Orient Rental Modaraba on August 31, 2024 and sell it today you would earn a total of 316.00 from holding Orient Rental Modaraba or generate 72.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 96.08% |
| Values | Daily Returns |
EFU General Insurance vs. Orient Rental Modaraba
Performance |
| Timeline |
| EFU General Insurance |
| Orient Rental Modaraba |
EFU General and Orient Rental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EFU General and Orient Rental
The main advantage of trading using opposite EFU General and Orient Rental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EFU General 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.| EFU General vs. Habib Bank | EFU General vs. National Bank of | EFU General vs. United Bank | EFU General vs. MCB Bank |
| Orient Rental vs. Masood Textile Mills | Orient Rental vs. Fauji Foods | Orient Rental vs. KSB Pumps | Orient Rental vs. Mari Petroleum |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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