Correlation Between Engro Polymer and Media Times

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

Diversification Opportunities for Engro Polymer and Media Times

0.47

Correlation Coefficient

Engro Polymer  Media Times

Very weak diversification

The 3 months correlation between Engro and Media is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Engro Polymer Chemicals and Media Times in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Media Times 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 Media Times. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Media Times has no effect on the direction of Engro Polymer i.e., Engro Polymer and Media Times go up and down completely randomly.

Pair Corralation between Engro Polymer and Media Times

Assuming the 90 days trading horizon Engro Polymer Chemicals is expected to under-perform the Media Times. But the stock apears to be less risky and, when comparing its historical volatility, Engro Polymer Chemicals is 3.61 times less risky than Media Times. The stock trades about -0.05 of its potential returns per unit of risk. The Media Times is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  174.00  in Media Times on September 28, 2024 and sell it today you would earn a total of  42.00  from holding Media Times or generate 24.14% return on investment over 90 days.

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

Engro Polymer Chemicals  vs.  Media Times

Engro Polymer Chemicals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Engro Polymer Chemicals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Engro Polymer may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Media Times

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Engro Polymer and Media Times

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

The idea behind Engro Polymer Chemicals and Media Times 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.