Correlation Between IBL HealthCare and Engro Polymer
Can any of the company-specific risk be diversified away by investing in both IBL HealthCare and Engro Polymer 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 IBL HealthCare and Engro Polymer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IBL HealthCare and Engro Polymer Chemicals, you can compare the effects of market volatilities on IBL HealthCare and Engro Polymer 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 IBL HealthCare with a short position of Engro Polymer. Check out your portfolio center. Please also check ongoing floating volatility patterns of IBL HealthCare and Engro Polymer.
Diversification Opportunities for IBL HealthCare and Engro Polymer
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IBL and Engro is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding IBL HealthCare and Engro Polymer Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Engro Polymer Chemicals and IBL HealthCare 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 IBL HealthCare are associated (or correlated) with Engro Polymer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Engro Polymer Chemicals has no effect on the direction of IBL HealthCare i.e., IBL HealthCare and Engro Polymer go up and down completely randomly.
Pair Corralation between IBL HealthCare and Engro Polymer
Assuming the 90 days trading horizon IBL HealthCare is expected to generate 1.58 times more return on investment than Engro Polymer. However, IBL HealthCare is 1.58 times more volatile than Engro Polymer Chemicals. It trades about 0.39 of its potential returns per unit of risk. Engro Polymer Chemicals is currently generating about 0.23 per unit of risk. If you would invest 2,895 in IBL HealthCare on September 1, 2024 and sell it today you would earn a total of 1,403 from holding IBL HealthCare or generate 48.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
IBL HealthCare vs. Engro Polymer Chemicals
Performance |
| Timeline |
| IBL HealthCare |
| Engro Polymer Chemicals |
IBL HealthCare and Engro Polymer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IBL HealthCare and Engro Polymer
The main advantage of trading using opposite IBL HealthCare and Engro Polymer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IBL HealthCare position performs unexpectedly, Engro Polymer 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 Engro Polymer will offset losses from the drop in Engro Polymer's long position.| IBL HealthCare vs. Masood Textile Mills | IBL HealthCare vs. Fauji Foods | IBL HealthCare vs. KSB Pumps | IBL HealthCare vs. Mari Petroleum |
| Engro Polymer vs. Ittehad Chemicals | Engro Polymer vs. Pakistan Telecommunication | Engro Polymer vs. IBL HealthCare | Engro Polymer vs. AKD Hospitality |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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