Correlation Between Engro Polymer and KSB Pumps
Can any of the company-specific risk be diversified away by investing in both Engro Polymer and KSB Pumps 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 KSB Pumps 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 KSB Pumps, you can compare the effects of market volatilities on Engro Polymer and KSB Pumps 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 KSB Pumps. Check out your portfolio center. Please also check ongoing floating volatility patterns of Engro Polymer and KSB Pumps.
Diversification Opportunities for Engro Polymer and KSB Pumps
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Engro and KSB is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Engro Polymer Chemicals and KSB Pumps in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KSB Pumps 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 KSB Pumps. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KSB Pumps has no effect on the direction of Engro Polymer i.e., Engro Polymer and KSB Pumps go up and down completely randomly.
Pair Corralation between Engro Polymer and KSB Pumps
Assuming the 90 days trading horizon Engro Polymer Chemicals is expected to under-perform the KSB Pumps. But the stock apears to be less risky and, when comparing its historical volatility, Engro Polymer Chemicals is 1.81 times less risky than KSB Pumps. The stock trades about 0.0 of its potential returns per unit of risk. The KSB Pumps is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 8,862 in KSB Pumps on November 29, 2024 and sell it today you would earn a total of 6,263 from holding KSB Pumps or generate 70.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 96.47% |
| Values | Daily Returns |
Engro Polymer Chemicals vs. KSB Pumps
Performance |
| Timeline |
| Engro Polymer Chemicals |
| KSB Pumps |
Engro Polymer and KSB Pumps Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Engro Polymer and KSB Pumps
The main advantage of trading using opposite Engro Polymer and KSB Pumps positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Engro Polymer position performs unexpectedly, KSB Pumps 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 KSB Pumps will offset losses from the drop in KSB Pumps' long position.| Engro Polymer vs. International Steels | Engro Polymer vs. Bawany Air Products | Engro Polymer vs. Metropolitan Steel Corp | Engro Polymer vs. Pakistan Synthetics |
| KSB Pumps vs. Askari Bank | KSB Pumps vs. Bawany Air Products | KSB Pumps vs. AKD Hospitality | KSB Pumps vs. Universal Insurance |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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