Correlation Between Unilever Pakistan and Dost Steels
Can any of the company-specific risk be diversified away by investing in both Unilever Pakistan and Dost Steels 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 Unilever Pakistan and Dost Steels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Unilever Pakistan Foods and Dost Steels, you can compare the effects of market volatilities on Unilever Pakistan and Dost Steels 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 Unilever Pakistan with a short position of Dost Steels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unilever Pakistan and Dost Steels.
Diversification Opportunities for Unilever Pakistan and Dost Steels
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Unilever and Dost is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Unilever Pakistan Foods and Dost Steels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dost Steels and Unilever Pakistan 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 Unilever Pakistan Foods are associated (or correlated) with Dost Steels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dost Steels has no effect on the direction of Unilever Pakistan i.e., Unilever Pakistan and Dost Steels go up and down completely randomly.
Pair Corralation between Unilever Pakistan and Dost Steels
Assuming the 90 days trading horizon Unilever Pakistan Foods is expected to under-perform the Dost Steels. But the stock apears to be less risky and, when comparing its historical volatility, Unilever Pakistan Foods is 1.13 times less risky than Dost Steels. The stock trades about -0.01 of its potential returns per unit of risk. The Dost Steels is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 517.00 in Dost Steels on September 2, 2024 and sell it today you would earn a total of 159.00 from holding Dost Steels or generate 30.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 61.73% |
| Values | Daily Returns |
Unilever Pakistan Foods vs. Dost Steels
Performance |
| Timeline |
| Unilever Pakistan Foods |
| Dost Steels |
Unilever Pakistan and Dost Steels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Unilever Pakistan and Dost Steels
The main advantage of trading using opposite Unilever Pakistan and Dost Steels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unilever Pakistan position performs unexpectedly, Dost Steels 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 Dost Steels will offset losses from the drop in Dost Steels' long position.| Unilever Pakistan vs. Engro Polymer Chemicals | Unilever Pakistan vs. Lotte Chemical Pakistan | Unilever Pakistan vs. Ittehad Chemicals | Unilever Pakistan vs. Allied Bank |
| Dost Steels vs. Pakistan Telecommunication | Dost Steels vs. Askari Bank | Dost Steels vs. Adamjee Insurance | Dost Steels vs. Soneri Bank |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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