Correlation Between Engro Polymer and Oil
Can any of the company-specific risk be diversified away by investing in both Engro Polymer and Oil 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 Oil 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 Oil and Gas, you can compare the effects of market volatilities on Engro Polymer and Oil 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 Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Engro Polymer and Oil.
Diversification Opportunities for Engro Polymer and Oil
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Engro and Oil is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Engro Polymer Chemicals and Oil and Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil and Gas 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 Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil and Gas has no effect on the direction of Engro Polymer i.e., Engro Polymer and Oil go up and down completely randomly.
Pair Corralation between Engro Polymer and Oil
Assuming the 90 days trading horizon Engro Polymer Chemicals is expected to under-perform the Oil. But the stock apears to be less risky and, when comparing its historical volatility, Engro Polymer Chemicals is 2.1 times less risky than Oil. The stock trades about -0.37 of its potential returns per unit of risk. The Oil and Gas is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 21,356 in Oil and Gas on November 5, 2024 and sell it today you would lose (705.00) from holding Oil and Gas or give up 3.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Engro Polymer Chemicals vs. Oil and Gas
Performance |
| Timeline |
| Engro Polymer Chemicals |
| Oil and Gas |
Engro Polymer and Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Engro Polymer and Oil
The main advantage of trading using opposite Engro Polymer and Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Engro Polymer position performs unexpectedly, Oil 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 Oil will offset losses from the drop in Oil's long position.| Engro Polymer vs. Fateh Sports Wear | Engro Polymer vs. Pakistan Synthetics | Engro Polymer vs. Ghani Chemical Industries | Engro Polymer vs. Lotte Chemical Pakistan |
| Oil vs. Sindh Modaraba Management | Oil vs. Beco Steel | Oil vs. Big Bird Foods | Oil vs. Supernet Technologie |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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