Correlation Between Engro Polymer and Fauji Foods
Can any of the company-specific risk be diversified away by investing in both Engro Polymer and Fauji Foods 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 Polymer and Fauji Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Engro Polymer Chemicals and Fauji Foods, you can compare the effects of market volatilities on Engro Polymer and Fauji Foods 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 Polymer with a short position of Fauji Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Engro Polymer and Fauji Foods.
Diversification Opportunities for Engro Polymer and Fauji Foods
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Engro and Fauji is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Engro Polymer Chemicals and Fauji Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fauji Foods and Engro Polymer 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 Polymer Chemicals are associated (or correlated) with Fauji Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fauji Foods has no effect on the direction of Engro Polymer i.e., Engro Polymer and Fauji Foods go up and down completely randomly.
Pair Corralation between Engro Polymer and Fauji Foods
Assuming the 90 days trading horizon Engro Polymer Chemicals is expected to under-perform the Fauji Foods. But the stock apears to be less risky and, when comparing its historical volatility, Engro Polymer Chemicals is 1.42 times less risky than Fauji Foods. The stock trades about 0.0 of its potential returns per unit of risk. The Fauji Foods is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 620.00 in Fauji Foods on September 1, 2024 and sell it today you would earn a total of 646.00 from holding Fauji Foods or generate 104.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Engro Polymer Chemicals vs. Fauji Foods
Performance |
| Timeline |
| Engro Polymer Chemicals |
| Fauji Foods |
Engro Polymer and Fauji Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Engro Polymer and Fauji Foods
The main advantage of trading using opposite Engro Polymer and Fauji Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Engro Polymer position performs unexpectedly, Fauji Foods 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 Fauji Foods will offset losses from the drop in Fauji Foods' long position.| Engro Polymer vs. Ittehad Chemicals | Engro Polymer vs. Pakistan Telecommunication | Engro Polymer vs. IBL HealthCare | Engro Polymer vs. AKD Hospitality |
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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