Correlation Between Unilever Pakistan and AKD Hospitality

Can any of the company-specific risk be diversified away by investing in both Unilever Pakistan and AKD Hospitality 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 AKD Hospitality 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 AKD Hospitality, you can compare the effects of market volatilities on Unilever Pakistan and AKD Hospitality 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 AKD Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unilever Pakistan and AKD Hospitality.

Diversification Opportunities for Unilever Pakistan and AKD Hospitality

0.91

Correlation Coefficient

Unilever Pakistan  AKD Hospitality

Almost no diversification

The 3 months correlation between Unilever and AKD is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Unilever Pakistan Foods and AKD Hospitality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AKD Hospitality 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 AKD Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AKD Hospitality has no effect on the direction of Unilever Pakistan i.e., Unilever Pakistan and AKD Hospitality go up and down completely randomly.

Pair Corralation between Unilever Pakistan and AKD Hospitality

Assuming the 90 days trading horizon Unilever Pakistan Foods is expected to generate 0.56 times more return on investment than AKD Hospitality. However, Unilever Pakistan Foods is 1.78 times less risky than AKD Hospitality. It trades about 0.06 of its potential returns per unit of risk. AKD Hospitality is currently generating about -0.02 per unit of risk. If you would invest  2,069,350  in Unilever Pakistan Foods on October 8, 2024 and sell it today you would earn a total of  29,881  from holding Unilever Pakistan Foods or generate 1.44% 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.  AKD Hospitality

Unilever Pakistan Foods

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Unilever Pakistan Foods are ranked lower than 21 (%) 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.

AKD Hospitality

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AKD Hospitality are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, AKD Hospitality disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Unilever Pakistan and AKD Hospitality

The main advantage of trading using opposite Unilever Pakistan and AKD Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unilever Pakistan position performs unexpectedly, AKD Hospitality 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 AKD Hospitality will offset losses from the drop in AKD Hospitality's long position.

The idea behind Unilever Pakistan Foods and AKD Hospitality 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.