Correlation Between Agha Steel and Engro Poly

Can any of the company-specific risk be diversified away by investing in both Agha Steel and Engro Poly 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 Agha Steel and Engro Poly into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Agha Steel Industries and Engro Poly, you can compare the effects of market volatilities on Agha Steel and Engro Poly 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 Agha Steel with a short position of Engro Poly. Check out your portfolio center. Please also check ongoing floating volatility patterns of Agha Steel and Engro Poly.

Diversification Opportunities for Agha Steel and Engro Poly

-0.2

Correlation Coefficient

Agha Steel  Engro Poly

Good diversification

The 3 months correlation between Agha and Engro is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Agha Steel Industries and Engro Poly in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Engro Poly and Agha Steel 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 Agha Steel Industries are associated (or correlated) with Engro Poly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Engro Poly has no effect on the direction of Agha Steel i.e., Agha Steel and Engro Poly go up and down completely randomly.

Pair Corralation between Agha Steel and Engro Poly

Assuming the 90 days trading horizon Agha Steel Industries is expected to under-perform the Engro Poly. But the stock apears to be less risky and, when comparing its historical volatility, Agha Steel Industries is 1.49 times less risky than Engro Poly. The stock trades about -0.07 of its potential returns per unit of risk. The Engro Poly is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,130  in Engro Poly on December 22, 2024 and sell it today you would earn a total of  0.00  from holding Engro Poly or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	79.03%
Values	Daily Returns

Agha Steel Industries  vs.  Engro Poly

Agha Steel Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Agha Steel Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Engro Poly

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Engro Poly are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Engro Poly is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Agha Steel and Engro Poly

The main advantage of trading using opposite Agha Steel and Engro Poly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Agha Steel position performs unexpectedly, Engro Poly 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 Poly will offset losses from the drop in Engro Poly's long position.

The idea behind Agha Steel Industries and Engro Poly pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.