Correlation Between Engro Polymer and Leather Up
Can any of the company-specific risk be diversified away by investing in both Engro Polymer and Leather Up 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 Leather Up 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 Leather Up, you can compare the effects of market volatilities on Engro Polymer and Leather Up 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 Leather Up. Check out your portfolio center. Please also check ongoing floating volatility patterns of Engro Polymer and Leather Up.
Diversification Opportunities for Engro Polymer and Leather Up
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Engro and Leather is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Engro Polymer Chemicals and Leather Up in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leather Up 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 Leather Up. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leather Up has no effect on the direction of Engro Polymer i.e., Engro Polymer and Leather Up go up and down completely randomly.
Pair Corralation between Engro Polymer and Leather Up
Assuming the 90 days trading horizon Engro Polymer Chemicals is expected to generate 0.49 times more return on investment than Leather Up. However, Engro Polymer Chemicals is 2.03 times less risky than Leather Up. It trades about 0.21 of its potential returns per unit of risk. Leather Up is currently generating about 0.04 per unit of risk. If you would invest 3,215 in Engro Polymer Chemicals on September 3, 2024 and sell it today you would earn a total of 435.00 from holding Engro Polymer Chemicals or generate 13.53% 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. Leather Up
Performance |
| Timeline |
| Engro Polymer Chemicals |
| Leather Up |
Engro Polymer and Leather Up Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Engro Polymer and Leather Up
The main advantage of trading using opposite Engro Polymer and Leather Up positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Engro Polymer position performs unexpectedly, Leather Up 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 Leather Up will offset losses from the drop in Leather Up's long position.| Engro Polymer vs. Masood Textile Mills | Engro Polymer vs. Fauji Foods | Engro Polymer vs. KSB Pumps | Engro Polymer vs. Mari Petroleum |
| Leather Up vs. EFU General Insurance | Leather Up vs. Silkbank | Leather Up vs. Meezan Bank | Leather Up vs. Beco Steel |
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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