Correlation Between Orient Rental and Century Insurance
Can any of the company-specific risk be diversified away by investing in both Orient Rental and Century Insurance 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 Orient Rental and Century Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Orient Rental Modaraba and Century Insurance, you can compare the effects of market volatilities on Orient Rental and Century Insurance 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 Orient Rental with a short position of Century Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orient Rental and Century Insurance.
Diversification Opportunities for Orient Rental and Century Insurance
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Orient and Century is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Orient Rental Modaraba and Century Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Insurance and Orient Rental 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 Orient Rental Modaraba are associated (or correlated) with Century Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Insurance has no effect on the direction of Orient Rental i.e., Orient Rental and Century Insurance go up and down completely randomly.
Pair Corralation between Orient Rental and Century Insurance
Assuming the 90 days trading horizon Orient Rental is expected to generate 1.84 times less return on investment than Century Insurance. But when comparing it to its historical volatility, Orient Rental Modaraba is 1.2 times less risky than Century Insurance. It trades about 0.08 of its potential returns per unit of risk. Century Insurance is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,738 in Century Insurance on August 27, 2024 and sell it today you would earn a total of 1,862 from holding Century Insurance or generate 107.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 92.71% |
| Values | Daily Returns |
Orient Rental Modaraba vs. Century Insurance
Performance |
| Timeline |
| Orient Rental Modaraba |
| Century Insurance |
Orient Rental and Century Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Orient Rental and Century Insurance
The main advantage of trading using opposite Orient Rental and Century Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orient Rental position performs unexpectedly, Century Insurance 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 Century Insurance will offset losses from the drop in Century Insurance's long position.| Orient Rental vs. Masood Textile Mills | Orient Rental vs. Fauji Foods | Orient Rental vs. KSB Pumps | Orient Rental vs. Mari Petroleum |
| Century Insurance vs. Habib Bank | Century Insurance vs. National Bank of | Century Insurance vs. United Bank | Century Insurance vs. MCB Bank |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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