Correlation Between Orient Rental and Metropolitan Steel

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

Diversification Opportunities for Orient Rental and Metropolitan Steel

0.81

Correlation Coefficient

Orient Rental  Metropolitan Steel

Very poor diversification

The 3 months correlation between Orient and Metropolitan is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Orient Rental Modaraba and Metropolitan Steel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metropolitan Steel Corp 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 Metropolitan Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metropolitan Steel Corp has no effect on the direction of Orient Rental i.e., Orient Rental and Metropolitan Steel go up and down completely randomly.

Pair Corralation between Orient Rental and Metropolitan Steel

Assuming the 90 days trading horizon Orient Rental is expected to generate 1.98 times less return on investment than Metropolitan Steel. But when comparing it to its historical volatility, Orient Rental Modaraba is 1.4 times less risky than Metropolitan Steel. It trades about 0.12 of its potential returns per unit of risk. Metropolitan Steel Corp is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  930.00  in Metropolitan Steel Corp on April 25, 2025 and sell it today you would earn a total of  507.00  from holding Metropolitan Steel Corp or generate 54.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Orient Rental Modaraba  vs.  Metropolitan Steel Corp

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 9 (%) 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.

Metropolitan Steel Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Metropolitan Steel Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Metropolitan Steel sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Orient Rental and Metropolitan Steel

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

The idea behind Orient Rental Modaraba and Metropolitan Steel Corp 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.