Correlation Between Engro Polymer and Unity Foods

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

Diversification Opportunities for Engro Polymer and Unity Foods

0.05

Correlation Coefficient

Engro Polymer  Unity Foods

Significant diversification

The 3 months correlation between Engro and Unity is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Engro Polymer Chemicals and Unity Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unity Foods 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 Unity Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unity Foods has no effect on the direction of Engro Polymer i.e., Engro Polymer and Unity Foods go up and down completely randomly.

Pair Corralation between Engro Polymer and Unity Foods

Assuming the 90 days trading horizon Engro Polymer Chemicals is expected to generate 1.29 times more return on investment than Unity Foods. However, Engro Polymer is 1.29 times more volatile than Unity Foods. It trades about 0.03 of its potential returns per unit of risk. Unity Foods is currently generating about -0.18 per unit of risk. If you would invest  3,789  in Engro Polymer Chemicals on December 23, 2024 and sell it today you would earn a total of  79.00  from holding Engro Polymer Chemicals or generate 2.08% return on investment over 90 days.

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

Engro Polymer Chemicals  vs.  Unity Foods

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 2 (%) 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.

Unity Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Unity Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Engro Polymer and Unity Foods

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

The idea behind Engro Polymer Chemicals and Unity Foods 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 Transaction History module to view history of all your transactions and understand their impact on performance.