Correlation Between Orient Rental and Asia Insurance

Can any of the company-specific risk be diversified away by investing in both Orient Rental and Asia 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 Asia 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 Asia Insurance, you can compare the effects of market volatilities on Orient Rental and Asia 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 Asia Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orient Rental and Asia Insurance.

Diversification Opportunities for Orient Rental and Asia Insurance

-0.47

Correlation Coefficient

Orient Rental  Asia Insurance

Very good diversification

The 3 months correlation between Orient and Asia is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Orient Rental Modaraba and Asia Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asia 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 Asia Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asia Insurance has no effect on the direction of Orient Rental i.e., Orient Rental and Asia Insurance go up and down completely randomly.

Pair Corralation between Orient Rental and Asia Insurance

Assuming the 90 days trading horizon Orient Rental is expected to generate 5.05 times less return on investment than Asia Insurance. But when comparing it to its historical volatility, Orient Rental Modaraba is 1.04 times less risky than Asia Insurance. It trades about 0.1 of its potential returns per unit of risk. Asia Insurance is currently generating about 0.48 of returns per unit of risk over similar time horizon. If you would invest  1,400  in Asia Insurance on April 22, 2025 and sell it today you would earn a total of  500.00  from holding Asia Insurance or generate 35.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	30.65%
Values	Daily Returns

Orient Rental Modaraba  vs.  Asia Insurance

Orient Rental Modaraba

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Orient Rental Modaraba are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Orient Rental reported solid returns over the last few months and may actually be approaching a breakup point.

Asia Insurance

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Asia Insurance are ranked lower than 38 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Asia Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Orient Rental and Asia Insurance

The main advantage of trading using opposite Orient Rental and Asia Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orient Rental position performs unexpectedly, Asia 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 Asia Insurance will offset losses from the drop in Asia Insurance's long position.

The idea behind Orient Rental Modaraba and Asia Insurance 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..