Correlation Between GM and Unilever Pakistan
Can any of the company-specific risk be diversified away by investing in both GM 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 GM and Unilever Pakistan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Unilever Pakistan Foods, you can compare the effects of market volatilities on GM 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 GM with a short position of Unilever Pakistan. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Unilever Pakistan.
Diversification Opportunities for GM and Unilever Pakistan
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between GM and Unilever is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding General Motors 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 GM 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 General Motors 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 GM i.e., GM and Unilever Pakistan go up and down completely randomly.
Pair Corralation between GM and Unilever Pakistan
Allowing for the 90-day total investment horizon General Motors is expected to generate 2.46 times more return on investment than Unilever Pakistan. However, GM is 2.46 times more volatile than Unilever Pakistan Foods. It trades about 0.12 of its potential returns per unit of risk. Unilever Pakistan Foods is currently generating about 0.22 per unit of risk. If you would invest 5,197 in General Motors on August 31, 2024 and sell it today you would earn a total of 353.00 from holding General Motors or generate 6.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. Unilever Pakistan Foods
Performance |
| Timeline |
| General Motors |
| Unilever Pakistan Foods |
GM and Unilever Pakistan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and Unilever Pakistan
The main advantage of trading using opposite GM and Unilever Pakistan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM 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.The idea behind General Motors and Unilever Pakistan Foods 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.| Unilever Pakistan vs. Masood Textile Mills | Unilever Pakistan vs. Fauji Foods | Unilever Pakistan vs. KSB Pumps | Unilever Pakistan vs. Mari Petroleum |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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