Correlation Between Matco Foods and Unilever Pakistan

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

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

Diversification Opportunities for Matco Foods and Unilever Pakistan

0.91

Correlation Coefficient

Matco Foods  Unilever Pakistan

Almost no diversification

The 3 months correlation between Matco and Unilever is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Matco Foods 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 Matco Foods 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 Matco Foods 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 Matco Foods i.e., Matco Foods and Unilever Pakistan go up and down completely randomly.

Pair Corralation between Matco Foods and Unilever Pakistan

Assuming the 90 days trading horizon Matco Foods is expected to generate 1.13 times more return on investment than Unilever Pakistan. However, Matco Foods is 1.13 times more volatile than Unilever Pakistan Foods. It trades about 0.04 of its potential returns per unit of risk. Unilever Pakistan Foods is currently generating about 0.01 per unit of risk. If you would invest  3,256  in Matco Foods on September 26, 2024 and sell it today you would earn a total of  1,192  from holding Matco Foods or generate 36.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	68.9%
Values	Daily Returns

Matco Foods  vs.  Unilever Pakistan Foods

Matco Foods

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Matco Foods are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Matco Foods reported solid returns over the last few months and may actually be approaching a breakup point.

Unilever Pakistan Foods

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Unilever Pakistan Foods are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Unilever Pakistan sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Matco Foods and Unilever Pakistan

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

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.