Correlation Between Murree Brewery and Engro Polymer
Can any of the company-specific risk be diversified away by investing in both Murree Brewery 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 Murree Brewery and Engro Polymer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Murree Brewery and Engro Polymer Chemicals, you can compare the effects of market volatilities on Murree Brewery 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 Murree Brewery with a short position of Engro Polymer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Murree Brewery and Engro Polymer.
Diversification Opportunities for Murree Brewery and Engro Polymer
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Murree and Engro is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Murree Brewery 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 Murree Brewery 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 Murree Brewery 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 Murree Brewery i.e., Murree Brewery and Engro Polymer go up and down completely randomly.
Pair Corralation between Murree Brewery and Engro Polymer
Assuming the 90 days trading horizon Murree Brewery is expected to generate 0.69 times more return on investment than Engro Polymer. However, Murree Brewery is 1.44 times less risky than Engro Polymer. It trades about 0.36 of its potential returns per unit of risk. Engro Polymer Chemicals is currently generating about 0.1 per unit of risk. If you would invest 48,257 in Murree Brewery on September 13, 2024 and sell it today you would earn a total of 21,375 from holding Murree Brewery or generate 44.29% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Murree Brewery vs. Engro Polymer Chemicals
Performance |
Timeline |
Murree Brewery |
Engro Polymer Chemicals |
Murree Brewery and Engro Polymer Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Murree Brewery and Engro Polymer
The main advantage of trading using opposite Murree Brewery and Engro Polymer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Murree Brewery 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.Murree Brewery vs. Honda Atlas Cars | Murree Brewery vs. Unity Foods | Murree Brewery vs. Air Link Communication | Murree Brewery vs. Matco Foods |
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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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