Correlation Between Ghani Chemical and Unilever Pakistan
Can any of the company-specific risk be diversified away by investing in both Ghani Chemical 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 Ghani Chemical and Unilever Pakistan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ghani Chemical Industries and Unilever Pakistan Foods, you can compare the effects of market volatilities on Ghani Chemical 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 Ghani Chemical with a short position of Unilever Pakistan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ghani Chemical and Unilever Pakistan.
Diversification Opportunities for Ghani Chemical and Unilever Pakistan
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ghani and Unilever is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Ghani Chemical Industries 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 Ghani Chemical 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 Ghani Chemical Industries 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 Ghani Chemical i.e., Ghani Chemical and Unilever Pakistan go up and down completely randomly.
Pair Corralation between Ghani Chemical and Unilever Pakistan
Assuming the 90 days trading horizon Ghani Chemical Industries is expected to generate 1.56 times more return on investment than Unilever Pakistan. However, Ghani Chemical is 1.56 times more volatile than Unilever Pakistan Foods. It trades about 0.07 of its potential returns per unit of risk. Unilever Pakistan Foods is currently generating about 0.05 per unit of risk. If you would invest 1,024 in Ghani Chemical Industries on November 27, 2024 and sell it today you would earn a total of 1,242 from holding Ghani Chemical Industries or generate 121.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 70.27% |
| Values | Daily Returns |
Ghani Chemical Industries vs. Unilever Pakistan Foods
Performance |
| Timeline |
| Ghani Chemical Industries |
| Unilever Pakistan Foods |
Ghani Chemical and Unilever Pakistan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ghani Chemical and Unilever Pakistan
The main advantage of trading using opposite Ghani Chemical and Unilever Pakistan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ghani Chemical 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.| Ghani Chemical vs. Data Agro | Ghani Chemical vs. Agritech | Ghani Chemical vs. Pakistan Telecommunication | Ghani Chemical vs. ITTEFAQ Iron Industries |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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