Correlation Between Unilever Pakistan and Wah Nobel

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

Diversification Opportunities for Unilever Pakistan and Wah Nobel

0.6

Correlation Coefficient

Unilever Pakistan  Wah Nobel

Poor diversification

The 3 months correlation between Unilever and Wah is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Unilever Pakistan Foods and Wah Nobel Chemicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wah Nobel Chemicals 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 Wah Nobel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wah Nobel Chemicals has no effect on the direction of Unilever Pakistan i.e., Unilever Pakistan and Wah Nobel go up and down completely randomly.

Pair Corralation between Unilever Pakistan and Wah Nobel

Assuming the 90 days trading horizon Unilever Pakistan Foods is expected to generate 0.37 times more return on investment than Wah Nobel. However, Unilever Pakistan Foods is 2.7 times less risky than Wah Nobel. It trades about 0.21 of its potential returns per unit of risk. Wah Nobel Chemicals is currently generating about -0.5 per unit of risk. If you would invest  2,100,001  in Unilever Pakistan Foods on October 25, 2024 and sell it today you would earn a total of  89,999  from holding Unilever Pakistan Foods or generate 4.29% return on investment over 90 days.

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

Unilever Pakistan Foods  vs.  Wah Nobel Chemicals

Unilever Pakistan Foods

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Unilever Pakistan Foods are ranked lower than 20 (%) 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.

Wah Nobel Chemicals

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wah Nobel Chemicals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Wah Nobel may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Unilever Pakistan and Wah Nobel

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

The idea behind Unilever Pakistan Foods and Wah Nobel Chemicals 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.