Correlation Between Engro Polymer and Unilever Pakistan
Can any of the company-specific risk be diversified away by investing in both Engro Polymer and Unilever Pakistan 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 Unilever Pakistan 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 Unilever Pakistan Foods, you can compare the effects of market volatilities on Engro Polymer and Unilever Pakistan 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 Unilever Pakistan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Engro Polymer and Unilever Pakistan.
Diversification Opportunities for Engro Polymer and Unilever Pakistan
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Engro and Unilever is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Engro Polymer Chemicals and Unilever Pakistan Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unilever Pakistan Foods 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 Unilever Pakistan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unilever Pakistan Foods has no effect on the direction of Engro Polymer i.e., Engro Polymer and Unilever Pakistan go up and down completely randomly.
Pair Corralation between Engro Polymer and Unilever Pakistan
Assuming the 90 days trading horizon Engro Polymer Chemicals is expected to under-perform the Unilever Pakistan. In addition to that, Engro Polymer is 2.28 times more volatile than Unilever Pakistan Foods. It trades about -0.02 of its total potential returns per unit of risk. Unilever Pakistan Foods is currently generating about 0.18 per unit of volatility. If you would invest 1,711,066 in Unilever Pakistan Foods on August 29, 2024 and sell it today you would earn a total of 190,869 from holding Unilever Pakistan Foods or generate 11.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Engro Polymer Chemicals vs. Unilever Pakistan Foods
Performance |
| Timeline |
| Engro Polymer Chemicals |
| Unilever Pakistan Foods |
Engro Polymer and Unilever Pakistan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Engro Polymer and Unilever Pakistan
The main advantage of trading using opposite Engro Polymer and Unilever Pakistan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Engro Polymer position performs unexpectedly, Unilever Pakistan 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 Unilever Pakistan will offset losses from the drop in Unilever Pakistan's long position.| Engro Polymer vs. Masood Textile Mills | Engro Polymer vs. Fauji Foods | Engro Polymer vs. KSB Pumps | Engro Polymer vs. Mari Petroleum |
| Unilever Pakistan vs. Masood Textile Mills | Unilever Pakistan vs. Fauji Foods | Unilever Pakistan vs. KSB Pumps | Unilever Pakistan 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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