Correlation Between Security Investment and Unilever Pakistan

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Can any of the company-specific risk be diversified away by investing in both Security Investment 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 Security Investment and Unilever Pakistan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Security Investment Bank and Unilever Pakistan Foods, you can compare the effects of market volatilities on Security Investment 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 Security Investment with a short position of Unilever Pakistan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Security Investment and Unilever Pakistan.

Diversification Opportunities for Security Investment and Unilever Pakistan

-0.15
  Correlation Coefficient

Good diversification

The 3 months correlation between Security and Unilever is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Security Investment Bank 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 Security Investment 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 Security Investment Bank 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 Security Investment i.e., Security Investment and Unilever Pakistan go up and down completely randomly.

Pair Corralation between Security Investment and Unilever Pakistan

Assuming the 90 days trading horizon Security Investment Bank is expected to generate 3.53 times more return on investment than Unilever Pakistan. However, Security Investment is 3.53 times more volatile than Unilever Pakistan Foods. It trades about 0.06 of its potential returns per unit of risk. Unilever Pakistan Foods is currently generating about 0.14 per unit of risk. If you would invest  483.00  in Security Investment Bank on August 28, 2024 and sell it today you would earn a total of  17.00  from holding Security Investment Bank or generate 3.52% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.24%
ValuesDaily Returns

Security Investment Bank  vs.  Unilever Pakistan Foods

 Performance 
       Timeline  
Security Investment Bank 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Security Investment Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
Unilever Pakistan Foods 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Unilever Pakistan Foods are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Unilever Pakistan sustained solid returns over the last few months and may actually be approaching a breakup point.

Security Investment and Unilever Pakistan Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Security Investment and Unilever Pakistan

The main advantage of trading using opposite Security Investment and Unilever Pakistan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Security Investment 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 Security Investment Bank 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.
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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.

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