Correlation Between Engro Poly and Hi Tech

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

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

Diversification Opportunities for Engro Poly and Hi Tech

-0.37

Correlation Coefficient

Engro Poly  Hi Tech

Very good diversification

The 3 months correlation between Engro and HTL is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Engro Poly and Hi Tech Lubricants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hi Tech Lubricants and Engro Poly 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 Poly are associated (or correlated) with Hi Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hi Tech Lubricants has no effect on the direction of Engro Poly i.e., Engro Poly and Hi Tech go up and down completely randomly.

Pair Corralation between Engro Poly and Hi Tech

Assuming the 90 days trading horizon Engro Poly is expected to generate 1.15 times more return on investment than Hi Tech. However, Engro Poly is 1.15 times more volatile than Hi Tech Lubricants. It trades about 0.01 of its potential returns per unit of risk. Hi Tech Lubricants is currently generating about -0.08 per unit of risk. 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

Engro Poly  vs.  Hi Tech Lubricants

Engro Poly

Risk-Adjusted Performance

Weak

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

Hi Tech Lubricants

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hi Tech Lubricants has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Engro Poly and Hi Tech

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

The idea behind Engro Poly and Hi Tech Lubricants 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.