Correlation Between Unilever Pakistan and Oil
Can any of the company-specific risk be diversified away by investing in both Unilever Pakistan and Oil 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 Oil 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 Oil and Gas, you can compare the effects of market volatilities on Unilever Pakistan and Oil 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 Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unilever Pakistan and Oil.
Diversification Opportunities for Unilever Pakistan and Oil
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Unilever and Oil is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Unilever Pakistan Foods and Oil and Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil and Gas 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 Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil and Gas has no effect on the direction of Unilever Pakistan i.e., Unilever Pakistan and Oil go up and down completely randomly.
Pair Corralation between Unilever Pakistan and Oil
Assuming the 90 days trading horizon Unilever Pakistan is expected to generate 20.88 times less return on investment than Oil. But when comparing it to its historical volatility, Unilever Pakistan Foods is 1.47 times less risky than Oil. It trades about 0.01 of its potential returns per unit of risk. Oil and Gas is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 7,571 in Oil and Gas on September 13, 2024 and sell it today you would earn a total of 12,914 from holding Oil and Gas or generate 170.57% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 72.01% |
Values | Daily Returns |
Unilever Pakistan Foods vs. Oil and Gas
Performance |
Timeline |
Unilever Pakistan Foods |
Oil and Gas |
Unilever Pakistan and Oil Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Unilever Pakistan and Oil
The main advantage of trading using opposite Unilever Pakistan and Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unilever Pakistan position performs unexpectedly, Oil 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 Oil will offset losses from the drop in Oil's long position.Unilever Pakistan vs. Masood Textile Mills | Unilever Pakistan vs. Fauji Foods | Unilever Pakistan vs. KSB Pumps | Unilever Pakistan vs. Mari Petroleum |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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