Correlation Between Pakistan Petroleum and Engro
Can any of the company-specific risk be diversified away by investing in both Pakistan Petroleum and Engro 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 Pakistan Petroleum and Engro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pakistan Petroleum and Engro, you can compare the effects of market volatilities on Pakistan Petroleum and Engro 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 Pakistan Petroleum with a short position of Engro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pakistan Petroleum and Engro.
Diversification Opportunities for Pakistan Petroleum and Engro
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Pakistan and Engro is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Petroleum and Engro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Engro and Pakistan Petroleum 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 Pakistan Petroleum are associated (or correlated) with Engro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Engro has no effect on the direction of Pakistan Petroleum i.e., Pakistan Petroleum and Engro go up and down completely randomly.
Pair Corralation between Pakistan Petroleum and Engro
Assuming the 90 days trading horizon Pakistan Petroleum is expected to generate 1.69 times more return on investment than Engro. However, Pakistan Petroleum is 1.69 times more volatile than Engro. It trades about 0.12 of its potential returns per unit of risk. Engro is currently generating about 0.07 per unit of risk. If you would invest 5,982 in Pakistan Petroleum on August 28, 2024 and sell it today you would earn a total of 9,425 from holding Pakistan Petroleum or generate 157.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pakistan Petroleum vs. Engro
Performance |
| Timeline |
| Pakistan Petroleum |
| Engro |
Pakistan Petroleum and Engro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pakistan Petroleum and Engro
The main advantage of trading using opposite Pakistan Petroleum and Engro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Petroleum position performs unexpectedly, Engro 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 will offset losses from the drop in Engro's long position.| Pakistan Petroleum vs. Al Ghazi Tractors | Pakistan Petroleum vs. Shell Pakistan | Pakistan Petroleum vs. Nestle Pakistan | Pakistan Petroleum vs. Hinopak Motors |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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