Correlation Between Unilever PLC and Koninklijke Philips
Can any of the company-specific risk be diversified away by investing in both Unilever PLC and Koninklijke Philips 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 PLC and Koninklijke Philips into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Unilever PLC and Koninklijke Philips NV, you can compare the effects of market volatilities on Unilever PLC and Koninklijke Philips 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 PLC with a short position of Koninklijke Philips. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unilever PLC and Koninklijke Philips.
Diversification Opportunities for Unilever PLC and Koninklijke Philips
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Unilever and Koninklijke is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC and Koninklijke Philips NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koninklijke Philips and Unilever PLC 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 PLC are associated (or correlated) with Koninklijke Philips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Koninklijke Philips has no effect on the direction of Unilever PLC i.e., Unilever PLC and Koninklijke Philips go up and down completely randomly.
Pair Corralation between Unilever PLC and Koninklijke Philips
Assuming the 90 days trading horizon Unilever PLC is expected to generate 6.28 times less return on investment than Koninklijke Philips. But when comparing it to its historical volatility, Unilever PLC is 4.44 times less risky than Koninklijke Philips. It trades about 0.18 of its potential returns per unit of risk. Koninklijke Philips NV is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 1,861 in Koninklijke Philips NV on February 1, 2024 and sell it today you would earn a total of 664.00 from holding Koninklijke Philips NV or generate 35.68% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Unilever PLC vs. Koninklijke Philips NV
Performance |
Timeline |
Unilever PLC |
Koninklijke Philips |
Unilever PLC and Koninklijke Philips Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Unilever PLC and Koninklijke Philips
The main advantage of trading using opposite Unilever PLC and Koninklijke Philips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unilever PLC position performs unexpectedly, Koninklijke Philips 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 Koninklijke Philips will offset losses from the drop in Koninklijke Philips' long position.Unilever PLC vs. Ctac NV | Unilever PLC vs. Value8 NV | Unilever PLC vs. NV Nederlandsche Apparatenfabriek |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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