Correlation Between Air Link and Unilever Pakistan

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

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

Diversification Opportunities for Air Link and Unilever Pakistan

-0.82

Correlation Coefficient

Air Link  Unilever Pakistan

Pay attention - limited upside

The 3 months correlation between Air and Unilever is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Air Link Communication 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 Air Link 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 Air Link Communication 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 Air Link i.e., Air Link and Unilever Pakistan go up and down completely randomly.

Pair Corralation between Air Link and Unilever Pakistan

Assuming the 90 days trading horizon Air Link Communication is expected to under-perform the Unilever Pakistan. In addition to that, Air Link is 2.11 times more volatile than Unilever Pakistan Foods. It trades about -0.11 of its total potential returns per unit of risk. Unilever Pakistan Foods is currently generating about 0.18 per unit of volatility. If you would invest  2,110,000  in Unilever Pakistan Foods on December 23, 2024 and sell it today you would earn a total of  246,555  from holding Unilever Pakistan Foods or generate 11.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Air Link Communication  vs.  Unilever Pakistan Foods

Air Link Communication

Risk-Adjusted Performance

Very Weak

Over the last 90 days Air Link Communication has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Unilever Pakistan Foods

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Unilever Pakistan Foods are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Unilever Pakistan may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Air Link and Unilever Pakistan

The main advantage of trading using opposite Air Link and Unilever Pakistan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Link 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 Air Link Communication 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.