Correlation Between Habib Insurance and Engro Polymer

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

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

Diversification Opportunities for Habib Insurance and Engro Polymer

-0.34

Correlation Coefficient

Habib Insurance  Engro Polymer

Very good diversification

The 3 months correlation between Habib and Engro is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Habib Insurance and Engro Polymer Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Engro Polymer Chemicals and Habib Insurance 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 Habib Insurance are associated (or correlated) with Engro Polymer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Engro Polymer Chemicals has no effect on the direction of Habib Insurance i.e., Habib Insurance and Engro Polymer go up and down completely randomly.

Pair Corralation between Habib Insurance and Engro Polymer

Assuming the 90 days trading horizon Habib Insurance is expected to generate 2.46 times less return on investment than Engro Polymer. But when comparing it to its historical volatility, Habib Insurance is 1.53 times less risky than Engro Polymer. It trades about 0.11 of its potential returns per unit of risk. Engro Polymer Chemicals is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  3,399  in Engro Polymer Chemicals on December 5, 2024 and sell it today you would earn a total of  321.00  from holding Engro Polymer Chemicals or generate 9.44% return on investment over 90 days.

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

Habib Insurance  vs.  Engro Polymer Chemicals

Habib Insurance

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Habib Insurance are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Habib Insurance sustained solid returns over the last few months and may actually be approaching a breakup point.

Engro Polymer Chemicals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Engro Polymer Chemicals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Habib Insurance and Engro Polymer

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

The idea behind Habib Insurance and Engro Polymer Chemicals 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .