Correlation Between Pakistan Telecommunicatio and Engro Poly

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

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

Diversification Opportunities for Pakistan Telecommunicatio and Engro Poly

0.46

Correlation Coefficient

Pakistan Telecommunicatio  Engro Poly

Very weak diversification

The 3 months correlation between Pakistan and Engro is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Pakistan Telecommunication and Engro Poly in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Engro Poly and Pakistan Telecommunicatio 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 Pakistan Telecommunication 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 Pakistan Telecommunicatio i.e., Pakistan Telecommunicatio and Engro Poly go up and down completely randomly.

Pair Corralation between Pakistan Telecommunicatio and Engro Poly

Assuming the 90 days trading horizon Pakistan Telecommunication is expected to generate 1.29 times more return on investment than Engro Poly. However, Pakistan Telecommunicatio is 1.29 times more volatile than Engro Poly. It trades about 0.1 of its potential returns per unit of risk. Engro Poly is currently generating about 0.0 per unit of risk. If you would invest  606.00  in Pakistan Telecommunication on October 10, 2024 and sell it today you would earn a total of  1,911  from holding Pakistan Telecommunication or generate 315.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	57.68%
Values	Daily Returns

Pakistan Telecommunication  vs.  Engro Poly

Pakistan Telecommunicatio

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Pakistan Telecommunication are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Pakistan Telecommunicatio reported 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 Pakistan Telecommunicatio and Engro Poly

The main advantage of trading using opposite Pakistan Telecommunicatio and Engro Poly positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pakistan Telecommunicatio 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 Pakistan Telecommunication 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.