Correlation Between Unilever Pakistan and International Steels
Can any of the company-specific risk be diversified away by investing in both Unilever Pakistan and International 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 International 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 International Steels, you can compare the effects of market volatilities on Unilever Pakistan and International 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 International Steels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unilever Pakistan and International Steels.
Diversification Opportunities for Unilever Pakistan and International Steels
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Unilever and International is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Unilever Pakistan Foods and International Steels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International 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 International Steels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Steels has no effect on the direction of Unilever Pakistan i.e., Unilever Pakistan and International Steels go up and down completely randomly.
Pair Corralation between Unilever Pakistan and International Steels
Assuming the 90 days trading horizon Unilever Pakistan Foods is expected to generate 0.51 times more return on investment than International Steels. However, Unilever Pakistan Foods is 1.97 times less risky than International Steels. It trades about 0.15 of its potential returns per unit of risk. International Steels is currently generating about 0.05 per unit of risk. If you would invest 1,866,686 in Unilever Pakistan Foods on August 30, 2024 and sell it today you would earn a total of 70,127 from holding Unilever Pakistan Foods or generate 3.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Unilever Pakistan Foods vs. International Steels
Performance |
| Timeline |
| Unilever Pakistan Foods |
| International Steels |
Unilever Pakistan and International Steels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Unilever Pakistan and International Steels
The main advantage of trading using opposite Unilever Pakistan and International Steels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unilever Pakistan position performs unexpectedly, International 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 International Steels will offset losses from the drop in International Steels' long position.| Unilever Pakistan vs. Shaheen Insurance | Unilever Pakistan vs. Hi Tech Lubricants | Unilever Pakistan vs. Century Insurance | Unilever Pakistan vs. 786 Investment Limited |
| International Steels vs. Oil and Gas | International Steels vs. Roshan Packages | International Steels vs. WorldCall Telecom | International Steels vs. Air Link Communication |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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