Correlation Between Century Insurance and Unilever Pakistan
Can any of the company-specific risk be diversified away by investing in both Century Insurance and Unilever Pakistan 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 Century Insurance and Unilever Pakistan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Century Insurance and Unilever Pakistan Foods, you can compare the effects of market volatilities on Century Insurance and Unilever Pakistan 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 Century Insurance with a short position of Unilever Pakistan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Insurance and Unilever Pakistan.
Diversification Opportunities for Century Insurance and Unilever Pakistan
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Century and Unilever is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Century Insurance and Unilever Pakistan Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unilever Pakistan Foods and Century 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 Century Insurance are associated (or correlated) with Unilever Pakistan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unilever Pakistan Foods has no effect on the direction of Century Insurance i.e., Century Insurance and Unilever Pakistan go up and down completely randomly.
Pair Corralation between Century Insurance and Unilever Pakistan
Assuming the 90 days trading horizon Century Insurance is expected to generate 1.14 times less return on investment than Unilever Pakistan. But when comparing it to its historical volatility, Century Insurance is 1.17 times less risky than Unilever Pakistan. It trades about 0.22 of its potential returns per unit of risk. Unilever Pakistan Foods is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 2,100,001 in Unilever Pakistan Foods on October 25, 2024 and sell it today you would earn a total of 89,999 from holding Unilever Pakistan Foods or generate 4.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 90.0% |
| Values | Daily Returns |
Century Insurance vs. Unilever Pakistan Foods
Performance |
| Timeline |
| Century Insurance |
| Unilever Pakistan Foods |
Century Insurance and Unilever Pakistan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Century Insurance and Unilever Pakistan
The main advantage of trading using opposite Century Insurance and Unilever Pakistan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Century Insurance position performs unexpectedly, Unilever Pakistan 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 Unilever Pakistan will offset losses from the drop in Unilever Pakistan's long position.| Century Insurance vs. Lotte Chemical Pakistan | Century Insurance vs. Metropolitan Steel Corp | Century Insurance vs. Engro Polymer Chemicals | Century Insurance vs. ORIX Leasing Pakistan |
| Unilever Pakistan vs. TPL Insurance | Unilever Pakistan vs. Allied Bank | Unilever Pakistan vs. Soneri Bank | Unilever Pakistan vs. Century Insurance |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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