Correlation Between Unilever Pakistan and Pakistan Tobacco
Can any of the company-specific risk be diversified away by investing in both Unilever Pakistan and Pakistan Tobacco 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 Pakistan Tobacco 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 Pakistan Tobacco, you can compare the effects of market volatilities on Unilever Pakistan and Pakistan Tobacco 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 Pakistan Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unilever Pakistan and Pakistan Tobacco.
Diversification Opportunities for Unilever Pakistan and Pakistan Tobacco
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Unilever and Pakistan is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Unilever Pakistan Foods and Pakistan Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pakistan Tobacco 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 Pakistan Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pakistan Tobacco has no effect on the direction of Unilever Pakistan i.e., Unilever Pakistan and Pakistan Tobacco go up and down completely randomly.
Pair Corralation between Unilever Pakistan and Pakistan Tobacco
Assuming the 90 days trading horizon Unilever Pakistan Foods is expected to generate 0.73 times more return on investment than Pakistan Tobacco. However, Unilever Pakistan Foods is 1.36 times less risky than Pakistan Tobacco. It trades about 0.22 of its potential returns per unit of risk. Pakistan Tobacco is currently generating about -0.14 per unit of risk. 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 | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Unilever Pakistan Foods vs. Pakistan Tobacco
Performance |
| Timeline |
| Unilever Pakistan Foods |
| Pakistan Tobacco |
Unilever Pakistan and Pakistan Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Unilever Pakistan and Pakistan Tobacco
The main advantage of trading using opposite Unilever Pakistan and Pakistan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unilever Pakistan position performs unexpectedly, Pakistan Tobacco 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 Pakistan Tobacco will offset losses from the drop in Pakistan Tobacco's long position.| Unilever Pakistan vs. Masood Textile Mills | Unilever Pakistan vs. Fauji Foods | Unilever Pakistan vs. KSB Pumps | Unilever Pakistan vs. Mari Petroleum |
| Pakistan Tobacco vs. Al Ghazi Tractors | Pakistan Tobacco vs. Shell Pakistan | Pakistan Tobacco vs. Pakistan State Oil | Pakistan Tobacco vs. Millat Tractors |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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