Correlation Between Engro Polymer and Treet
Can any of the company-specific risk be diversified away by investing in both Engro Polymer and Treet 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 Treet 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 Treet, you can compare the effects of market volatilities on Engro Polymer and Treet 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 Treet. Check out your portfolio center. Please also check ongoing floating volatility patterns of Engro Polymer and Treet.
Diversification Opportunities for Engro Polymer and Treet
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Engro and Treet is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Engro Polymer Chemicals and Treet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Treet 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 Treet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Treet has no effect on the direction of Engro Polymer i.e., Engro Polymer and Treet go up and down completely randomly.
Pair Corralation between Engro Polymer and Treet
Assuming the 90 days trading horizon Engro Polymer is expected to generate 1.51 times less return on investment than Treet. But when comparing it to its historical volatility, Engro Polymer Chemicals is 1.25 times less risky than Treet. It trades about 0.22 of its potential returns per unit of risk. Treet is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 1,402 in Treet on September 2, 2024 and sell it today you would earn a total of 327.00 from holding Treet or generate 23.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Engro Polymer Chemicals vs. Treet
Performance |
| Timeline |
| Engro Polymer Chemicals |
| Treet |
Engro Polymer and Treet Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Engro Polymer and Treet
The main advantage of trading using opposite Engro Polymer and Treet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Engro Polymer position performs unexpectedly, Treet 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 Treet will offset losses from the drop in Treet's long position.| Engro Polymer vs. Masood Textile Mills | Engro Polymer vs. Fauji Foods | Engro Polymer vs. KSB Pumps | Engro Polymer vs. Mari Petroleum |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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