Correlation Between KSB Pumps and Orient Rental
Can any of the company-specific risk be diversified away by investing in both KSB Pumps 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 KSB Pumps and Orient Rental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KSB Pumps and Orient Rental Modaraba, you can compare the effects of market volatilities on KSB Pumps 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 KSB Pumps with a short position of Orient Rental. Check out your portfolio center. Please also check ongoing floating volatility patterns of KSB Pumps and Orient Rental.
Diversification Opportunities for KSB Pumps and Orient Rental
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between KSB and Orient is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding KSB Pumps 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 KSB Pumps 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 KSB Pumps 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 KSB Pumps i.e., KSB Pumps and Orient Rental go up and down completely randomly.
Pair Corralation between KSB Pumps and Orient Rental
Assuming the 90 days trading horizon KSB Pumps is expected to generate 1.02 times more return on investment than Orient Rental. However, KSB Pumps is 1.02 times more volatile than Orient Rental Modaraba. It trades about 0.02 of its potential returns per unit of risk. Orient Rental Modaraba is currently generating about -0.03 per unit of risk. If you would invest 13,054 in KSB Pumps on August 29, 2024 and sell it today you would earn a total of 88.00 from holding KSB Pumps or generate 0.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
KSB Pumps vs. Orient Rental Modaraba
Performance |
| Timeline |
| KSB Pumps |
| Orient Rental Modaraba |
KSB Pumps and Orient Rental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KSB Pumps and Orient Rental
The main advantage of trading using opposite KSB Pumps and Orient Rental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KSB Pumps 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.| KSB Pumps vs. Masood Textile Mills | KSB Pumps vs. Fauji Foods | KSB Pumps vs. Mari Petroleum | KSB Pumps vs. Loads |
| 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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