Correlation Between Unilever Pakistan and Murree Brewery

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

Diversification Opportunities for Unilever Pakistan and Murree Brewery

0.93

Correlation Coefficient

Unilever Pakistan  Murree Brewery

Almost no diversification

The 3 months correlation between Unilever and Murree is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Unilever Pakistan Foods and Murree Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Murree Brewery 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 Murree Brewery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Murree Brewery has no effect on the direction of Unilever Pakistan i.e., Unilever Pakistan and Murree Brewery go up and down completely randomly.

Pair Corralation between Unilever Pakistan and Murree Brewery

Assuming the 90 days trading horizon Unilever Pakistan is expected to generate 1.92 times less return on investment than Murree Brewery. But when comparing it to its historical volatility, Unilever Pakistan Foods is 1.66 times less risky than Murree Brewery. It trades about 0.23 of its potential returns per unit of risk. Murree Brewery is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  50,403  in Murree Brewery on September 3, 2024 and sell it today you would earn a total of  15,397  from holding Murree Brewery or generate 30.55% 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.  Murree Brewery

Unilever Pakistan Foods

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Unilever Pakistan Foods are ranked lower than 18 (%) 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.

Murree Brewery

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Murree Brewery are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Murree Brewery disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Unilever Pakistan and Murree Brewery

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

The idea behind Unilever Pakistan Foods and Murree Brewery 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.