Correlation Between Engro and Gul Ahmed
Can any of the company-specific risk be diversified away by investing in both Engro and Gul Ahmed 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 Engro and Gul Ahmed into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Engro and Gul Ahmed Textile, you can compare the effects of market volatilities on Engro and Gul Ahmed 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 Engro with a short position of Gul Ahmed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Engro and Gul Ahmed.
Diversification Opportunities for Engro and Gul Ahmed
Very poor diversification
The 3 months correlation between Engro and Gul is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Engro and Gul Ahmed Textile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gul Ahmed Textile and Engro 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 Engro are associated (or correlated) with Gul Ahmed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gul Ahmed Textile has no effect on the direction of Engro i.e., Engro and Gul Ahmed go up and down completely randomly.
Pair Corralation between Engro and Gul Ahmed
Assuming the 90 days trading horizon Engro is expected to generate 0.83 times more return on investment than Gul Ahmed. However, Engro is 1.21 times less risky than Gul Ahmed. It trades about 0.09 of its potential returns per unit of risk. Gul Ahmed Textile is currently generating about 0.04 per unit of risk. If you would invest 20,583 in Engro on September 12, 2024 and sell it today you would earn a total of 20,437 from holding Engro or generate 99.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Engro vs. Gul Ahmed Textile
Performance |
| Timeline |
| Engro |
| Gul Ahmed Textile |
Engro and Gul Ahmed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Engro and Gul Ahmed
The main advantage of trading using opposite Engro and Gul Ahmed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Engro position performs unexpectedly, Gul Ahmed 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 Gul Ahmed will offset losses from the drop in Gul Ahmed's long position.The idea behind Engro and Gul Ahmed Textile 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.| Gul Ahmed vs. Agha Steel Industries | Gul Ahmed vs. Air Link Communication | Gul Ahmed vs. Beco Steel | Gul Ahmed vs. Amreli Steels |
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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