Correlation Between Wah Nobel and Unilever Pakistan
Can any of the company-specific risk be diversified away by investing in both Wah Nobel 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 Wah Nobel and Unilever Pakistan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wah Nobel Chemicals and Unilever Pakistan Foods, you can compare the effects of market volatilities on Wah Nobel 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 Wah Nobel with a short position of Unilever Pakistan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wah Nobel and Unilever Pakistan.
Diversification Opportunities for Wah Nobel and Unilever Pakistan
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Wah and Unilever is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Wah Nobel Chemicals 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 Wah Nobel 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 Wah Nobel Chemicals 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 Wah Nobel i.e., Wah Nobel and Unilever Pakistan go up and down completely randomly.
Pair Corralation between Wah Nobel and Unilever Pakistan
Assuming the 90 days trading horizon Wah Nobel Chemicals is expected to generate 2.8 times more return on investment than Unilever Pakistan. However, Wah Nobel is 2.8 times more volatile than Unilever Pakistan Foods. It trades about 0.08 of its potential returns per unit of risk. Unilever Pakistan Foods is currently generating about 0.09 per unit of risk. If you would invest 17,773 in Wah Nobel Chemicals on August 25, 2024 and sell it today you would earn a total of 4,251 from holding Wah Nobel Chemicals or generate 23.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.19% |
| Values | Daily Returns |
Wah Nobel Chemicals vs. Unilever Pakistan Foods
Performance |
| Timeline |
| Wah Nobel Chemicals |
| Unilever Pakistan Foods |
Wah Nobel and Unilever Pakistan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wah Nobel and Unilever Pakistan
The main advantage of trading using opposite Wah Nobel and Unilever Pakistan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wah Nobel 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.| Wah Nobel vs. Masood Textile Mills | Wah Nobel vs. Fauji Foods | Wah Nobel vs. KSB Pumps | Wah Nobel vs. Mari Petroleum |
| 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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