Correlation Between United Insurance and Unilever Pakistan
Can any of the company-specific risk be diversified away by investing in both United 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 United 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 United Insurance and Unilever Pakistan Foods, you can compare the effects of market volatilities on United 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 United Insurance with a short position of Unilever Pakistan. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Insurance and Unilever Pakistan.
Diversification Opportunities for United Insurance and Unilever Pakistan
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and Unilever is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding United 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 United 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 United 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 United Insurance i.e., United Insurance and Unilever Pakistan go up and down completely randomly.
Pair Corralation between United Insurance and Unilever Pakistan
Assuming the 90 days trading horizon United Insurance is expected to under-perform the Unilever Pakistan. But the stock apears to be less risky and, when comparing its historical volatility, United Insurance is 1.39 times less risky than Unilever Pakistan. The stock trades about -0.08 of its potential returns per unit of risk. The Unilever Pakistan Foods is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 1,847,952 in Unilever Pakistan Foods on August 31, 2024 and sell it today you would earn a total of 101,532 from holding Unilever Pakistan Foods or generate 5.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Insurance vs. Unilever Pakistan Foods
Performance |
| Timeline |
| United Insurance |
| Unilever Pakistan Foods |
United Insurance and Unilever Pakistan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Insurance and Unilever Pakistan
The main advantage of trading using opposite United Insurance and Unilever Pakistan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United 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.| United Insurance vs. Habib Bank | United Insurance vs. National Bank of | United Insurance vs. United Bank | United Insurance vs. MCB Bank |
| 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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