Correlation Between Engro Polymer and Soneri Bank
Can any of the company-specific risk be diversified away by investing in both Engro Polymer and Soneri Bank 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 Soneri Bank 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 Soneri Bank, you can compare the effects of market volatilities on Engro Polymer and Soneri Bank 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 Soneri Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Engro Polymer and Soneri Bank.
Diversification Opportunities for Engro Polymer and Soneri Bank
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Engro and Soneri is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Engro Polymer Chemicals and Soneri Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soneri Bank 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 Soneri Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soneri Bank has no effect on the direction of Engro Polymer i.e., Engro Polymer and Soneri Bank go up and down completely randomly.
Pair Corralation between Engro Polymer and Soneri Bank
Assuming the 90 days trading horizon Engro Polymer Chemicals is expected to under-perform the Soneri Bank. But the stock apears to be less risky and, when comparing its historical volatility, Engro Polymer Chemicals is 1.58 times less risky than Soneri Bank. The stock trades about -0.12 of its potential returns per unit of risk. The Soneri Bank is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 1,649 in Soneri Bank on October 21, 2024 and sell it today you would earn a total of 173.00 from holding Soneri Bank or generate 10.49% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Engro Polymer Chemicals vs. Soneri Bank
Performance |
Timeline |
Engro Polymer Chemicals |
Soneri Bank |
Engro Polymer and Soneri Bank Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Engro Polymer and Soneri Bank
The main advantage of trading using opposite Engro Polymer and Soneri Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Engro Polymer position performs unexpectedly, Soneri Bank 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 Soneri Bank will offset losses from the drop in Soneri Bank's long position.Engro Polymer vs. Unity Foods | Engro Polymer vs. Oil and Gas | Engro Polymer vs. Fateh Sports Wear | Engro Polymer vs. Packages |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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