Correlation Between Ghandhara Automobile and Orient Rental

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

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

Diversification Opportunities for Ghandhara Automobile and Orient Rental

0.01

Correlation Coefficient

Ghandhara Automobile  Orient Rental

Significant diversification

The 3 months correlation between Ghandhara and Orient is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Ghandhara Automobile 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 Ghandhara Automobile 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 Ghandhara Automobile 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 Ghandhara Automobile i.e., Ghandhara Automobile and Orient Rental go up and down completely randomly.

Pair Corralation between Ghandhara Automobile and Orient Rental

Assuming the 90 days trading horizon Ghandhara Automobile is expected to generate 13.08 times less return on investment than Orient Rental. In addition to that, Ghandhara Automobile is 1.17 times more volatile than Orient Rental Modaraba. It trades about 0.01 of its total potential returns per unit of risk. Orient Rental Modaraba is currently generating about 0.18 per unit of volatility. If you would invest  583.00  in Orient Rental Modaraba on September 5, 2024 and sell it today you would earn a total of  216.00  from holding Orient Rental Modaraba or generate 37.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Ghandhara Automobile  vs.  Orient Rental Modaraba

Ghandhara Automobile

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ghandhara Automobile has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Ghandhara Automobile is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

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 Ghandhara Automobile and Orient Rental

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

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.