Correlation Between Unilever Pakistan and ITTEFAQ Iron

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

Diversification Opportunities for Unilever Pakistan and ITTEFAQ Iron

-0.49

Correlation Coefficient

Unilever Pakistan  ITTEFAQ Iron

Very good diversification

The 3 months correlation between Unilever and ITTEFAQ is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Unilever Pakistan Foods and ITTEFAQ Iron Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITTEFAQ Iron Industries 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 ITTEFAQ Iron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITTEFAQ Iron Industries has no effect on the direction of Unilever Pakistan i.e., Unilever Pakistan and ITTEFAQ Iron go up and down completely randomly.

Pair Corralation between Unilever Pakistan and ITTEFAQ Iron

Assuming the 90 days trading horizon Unilever Pakistan Foods is expected to generate 0.23 times more return on investment than ITTEFAQ Iron. However, Unilever Pakistan Foods is 4.36 times less risky than ITTEFAQ Iron. It trades about 0.13 of its potential returns per unit of risk. ITTEFAQ Iron Industries is currently generating about 0.0 per unit of risk. If you would invest  2,122,503  in Unilever Pakistan Foods on December 31, 2024 and sell it today you would earn a total of  177,608  from holding Unilever Pakistan Foods or generate 8.37% return on investment over 90 days.

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

Unilever Pakistan Foods  vs.  ITTEFAQ Iron Industries

Unilever Pakistan Foods

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Unilever Pakistan Foods are ranked lower than 10 (%) 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 May 2025.

ITTEFAQ Iron Industries

Risk-Adjusted Performance

Weak

Over the last 90 days ITTEFAQ Iron Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, ITTEFAQ Iron is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Unilever Pakistan and ITTEFAQ Iron

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

The idea behind Unilever Pakistan Foods and ITTEFAQ Iron Industries 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.