Correlation Between Engro Polymer and Adamjee Insurance

Can any of the company-specific risk be diversified away by investing in both Engro Polymer and Adamjee Insurance 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 Adamjee Insurance 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 Adamjee Insurance, you can compare the effects of market volatilities on Engro Polymer and Adamjee Insurance 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 Adamjee Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Engro Polymer and Adamjee Insurance.

Diversification Opportunities for Engro Polymer and Adamjee Insurance

-0.3

Correlation Coefficient

Engro Polymer  Adamjee Insurance

Very good diversification

The 3 months correlation between Engro and Adamjee is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Engro Polymer Chemicals and Adamjee Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adamjee Insurance 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 Adamjee Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adamjee Insurance has no effect on the direction of Engro Polymer i.e., Engro Polymer and Adamjee Insurance go up and down completely randomly.

Pair Corralation between Engro Polymer and Adamjee Insurance

Assuming the 90 days trading horizon Engro Polymer Chemicals is expected to generate 0.85 times more return on investment than Adamjee Insurance. However, Engro Polymer Chemicals is 1.18 times less risky than Adamjee Insurance. It trades about 0.02 of its potential returns per unit of risk. Adamjee Insurance is currently generating about -0.04 per unit of risk. If you would invest  3,699  in Engro Polymer Chemicals on December 29, 2024 and sell it today you would earn a total of  56.00  from holding Engro Polymer Chemicals or generate 1.51% return on investment over 90 days.

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

Engro Polymer Chemicals  vs.  Adamjee Insurance

Engro Polymer Chemicals

Risk-Adjusted Performance

Weak

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

Adamjee Insurance

Risk-Adjusted Performance

Very Weak

Over the last 90 days Adamjee Insurance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Adamjee Insurance is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Engro Polymer and Adamjee Insurance

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

The idea behind Engro Polymer Chemicals and Adamjee Insurance 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.