Correlation Between Jubilee Life and Engro Fertilizers

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

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

Diversification Opportunities for Jubilee Life and Engro Fertilizers

0.59

Correlation Coefficient

Jubilee Life  Engro Fertilizers

Very weak diversification

The 3 months correlation between Jubilee and Engro is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Jubilee Life Insurance and Engro Fertilizers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Engro Fertilizers and Jubilee Life 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 Jubilee Life Insurance are associated (or correlated) with Engro Fertilizers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Engro Fertilizers has no effect on the direction of Jubilee Life i.e., Jubilee Life and Engro Fertilizers go up and down completely randomly.

Pair Corralation between Jubilee Life and Engro Fertilizers

Assuming the 90 days trading horizon Jubilee Life Insurance is expected to under-perform the Engro Fertilizers. But the stock apears to be less risky and, when comparing its historical volatility, Jubilee Life Insurance is 1.1 times less risky than Engro Fertilizers. The stock trades about -0.07 of its potential returns per unit of risk. The Engro Fertilizers is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  20,895  in Engro Fertilizers on October 7, 2024 and sell it today you would earn a total of  3,050  from holding Engro Fertilizers or generate 14.6% return on investment over 90 days.

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

Jubilee Life Insurance  vs.  Engro Fertilizers

Jubilee Life Insurance

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jubilee Life Insurance are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward indicators, Jubilee Life disclosed solid returns over the last few months and may actually be approaching a breakup point.

Engro Fertilizers

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Engro Fertilizers are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Engro Fertilizers disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jubilee Life and Engro Fertilizers

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

The idea behind Jubilee Life Insurance and Engro Fertilizers 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.