Correlation Between Grays Leasing and Engro

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

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

Diversification Opportunities for Grays Leasing and Engro

-0.05

Correlation Coefficient

Grays Leasing  Engro

Good diversification

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

Pair Corralation between Grays Leasing and Engro

Assuming the 90 days trading horizon Grays Leasing is expected to generate 3.17 times less return on investment than Engro. In addition to that, Grays Leasing is 1.93 times more volatile than Engro. It trades about 0.06 of its total potential returns per unit of risk. Engro is currently generating about 0.39 per unit of volatility. If you would invest  30,597  in Engro on September 5, 2024 and sell it today you would earn a total of  7,410  from holding Engro or generate 24.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Grays Leasing  vs.  Engro

Grays Leasing

Risk-Adjusted Performance

0 of 100

Very Weak

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

Engro

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Engro are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Engro disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grays Leasing and Engro

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

The idea behind Grays Leasing and Engro 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.