Correlation Between Nimir Industrial and Engro Poly

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

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

Diversification Opportunities for Nimir Industrial and Engro Poly

0.36

Correlation Coefficient

Nimir Industrial  Engro Poly

Weak diversification

The 3 months correlation between Nimir and Engro is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Nimir Industrial Chemical and Engro Poly in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Engro Poly and Nimir Industrial 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 Nimir Industrial Chemical are associated (or correlated) with Engro Poly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Engro Poly has no effect on the direction of Nimir Industrial i.e., Nimir Industrial and Engro Poly go up and down completely randomly.

Pair Corralation between Nimir Industrial and Engro Poly

Assuming the 90 days trading horizon Nimir Industrial Chemical is expected to generate 1.13 times more return on investment than Engro Poly. However, Nimir Industrial is 1.13 times more volatile than Engro Poly. It trades about 0.08 of its potential returns per unit of risk. Engro Poly is currently generating about 0.0 per unit of risk. If you would invest  5,632  in Nimir Industrial Chemical on October 10, 2024 and sell it today you would earn a total of  8,068  from holding Nimir Industrial Chemical or generate 143.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	64.8%
Values	Daily Returns

Nimir Industrial Chemical  vs.  Engro Poly

Nimir Industrial Chemical

Risk-Adjusted Performance

8 of 100

OK

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

Engro Poly

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Engro Poly are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Nimir Industrial and Engro Poly

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

The idea behind Nimir Industrial Chemical and Engro Poly 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.