Correlation Between Unilever Pakistan and Mari Petroleum
Can any of the company-specific risk be diversified away by investing in both Unilever Pakistan and Mari Petroleum 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 Mari Petroleum 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 Mari Petroleum, you can compare the effects of market volatilities on Unilever Pakistan and Mari Petroleum 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 Mari Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unilever Pakistan and Mari Petroleum.
Diversification Opportunities for Unilever Pakistan and Mari Petroleum
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Unilever and Mari is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Unilever Pakistan Foods and Mari Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mari Petroleum 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 Mari Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mari Petroleum has no effect on the direction of Unilever Pakistan i.e., Unilever Pakistan and Mari Petroleum go up and down completely randomly.
Pair Corralation between Unilever Pakistan and Mari Petroleum
Assuming the 90 days trading horizon Unilever Pakistan is expected to generate 7.32 times less return on investment than Mari Petroleum. But when comparing it to its historical volatility, Unilever Pakistan Foods is 1.79 times less risky than Mari Petroleum. It trades about 0.03 of its potential returns per unit of risk. Mari Petroleum is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 6,674 in Mari Petroleum on November 2, 2024 and sell it today you would earn a total of 53,526 from holding Mari Petroleum or generate 802.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 68.94% |
| Values | Daily Returns |
Unilever Pakistan Foods vs. Mari Petroleum
Performance |
| Timeline |
| Unilever Pakistan Foods |
| Mari Petroleum |
Unilever Pakistan and Mari Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Unilever Pakistan and Mari Petroleum
The main advantage of trading using opposite Unilever Pakistan and Mari Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unilever Pakistan position performs unexpectedly, Mari Petroleum 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 Mari Petroleum will offset losses from the drop in Mari Petroleum's long position.| Unilever Pakistan vs. Air Link Communication | Unilever Pakistan vs. Mughal Iron Steel | Unilever Pakistan vs. Pakistan Telecommunication | Unilever Pakistan vs. Beco Steel |
| Mari Petroleum vs. WorldCall Telecom | Mari Petroleum vs. IGI Life Insurance | Mari Petroleum vs. Air Link Communication | Mari Petroleum vs. Pakistan Telecommunication |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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