Correlation Between Crescent Star and Engro Polymer

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

By analyzing existing cross correlation between Crescent Star Insurance and Engro Polymer Chemicals, you can compare the effects of market volatilities on Crescent Star 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 Crescent Star with a short position of Engro Polymer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crescent Star and Engro Polymer.

Diversification Opportunities for Crescent Star and Engro Polymer

0.65

Correlation Coefficient

Crescent Star  Engro Polymer

Poor diversification

The 3 months correlation between Crescent and Engro is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Crescent Star Insurance 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 Crescent Star 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 Crescent Star Insurance 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 Crescent Star i.e., Crescent Star and Engro Polymer go up and down completely randomly.

Pair Corralation between Crescent Star and Engro Polymer

Assuming the 90 days trading horizon Crescent Star Insurance is expected to generate 1.9 times more return on investment than Engro Polymer. However, Crescent Star is 1.9 times more volatile than Engro Polymer Chemicals. It trades about 0.0 of its potential returns per unit of risk. Engro Polymer Chemicals is currently generating about -0.17 per unit of risk. If you would invest  315.00  in Crescent Star Insurance on October 8, 2024 and sell it today you would lose (4.00) from holding Crescent Star Insurance or give up 1.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Crescent Star Insurance  vs.  Engro Polymer Chemicals

Crescent Star Insurance

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Crescent Star Insurance are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Crescent Star sustained solid returns over the last few months and may actually be approaching a breakup point.

Engro Polymer Chemicals

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Engro Polymer Chemicals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Engro Polymer sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Crescent Star and Engro Polymer

The main advantage of trading using opposite Crescent Star and Engro Polymer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crescent Star 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.

The idea behind Crescent Star Insurance and Engro Polymer Chemicals 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.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.