Correlation Between Invest Capital and Unilever Pakistan

Can any of the company-specific risk be diversified away by investing in both Invest Capital 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 Invest Capital and Unilever Pakistan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Invest Capital Investment and Unilever Pakistan Foods, you can compare the effects of market volatilities on Invest Capital 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 Invest Capital with a short position of Unilever Pakistan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invest Capital and Unilever Pakistan.

Diversification Opportunities for Invest Capital and Unilever Pakistan

-0.32

Correlation Coefficient

Invest Capital  Unilever Pakistan

Very good diversification

The 3 months correlation between Invest and Unilever is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Invest Capital Investment 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 Invest Capital 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 Invest Capital Investment 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 Invest Capital i.e., Invest Capital and Unilever Pakistan go up and down completely randomly.

Pair Corralation between Invest Capital and Unilever Pakistan

Assuming the 90 days trading horizon Invest Capital Investment is expected to generate 4.11 times more return on investment than Unilever Pakistan. However, Invest Capital is 4.11 times more volatile than Unilever Pakistan Foods. It trades about 0.03 of its potential returns per unit of risk. Unilever Pakistan Foods is currently generating about -0.36 per unit of risk. If you would invest  140.00  in Invest Capital Investment on January 26, 2024 and sell it today you would earn a total of  1.00  from holding Invest Capital Investment or generate 0.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	66.67%
Values	Daily Returns

Invest Capital Investment  vs.  Unilever Pakistan Foods

Invest Capital Investment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invest Capital Investment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Invest Capital disclosed solid returns over the last few months and may actually be approaching a breakup point.

Unilever Pakistan Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unilever Pakistan Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Invest Capital and Unilever Pakistan

The main advantage of trading using opposite Invest Capital and Unilever Pakistan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invest Capital 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.

The idea behind Invest Capital Investment and Unilever Pakistan Foods pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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.