Correlation Between Unilever PLC and HP

Can any of the company-specific risk be diversified away by investing in both Unilever PLC and HP 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 HP into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Unilever PLC ADR and HP Inc, you can compare the effects of market volatilities on Unilever PLC and HP 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 HP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unilever PLC and HP.

Diversification Opportunities for Unilever PLC and HP

0.01

Correlation Coefficient

Unilever PLC  HP

Significant diversification

The 3 months correlation between Unilever and HP is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC ADR and HP Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HP Inc 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 ADR are associated (or correlated) with HP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HP Inc has no effect on the direction of Unilever PLC i.e., Unilever PLC and HP go up and down completely randomly.

Pair Corralation between Unilever PLC and HP

Allowing for the 90-day total investment horizon Unilever PLC ADR is expected to generate 0.53 times more return on investment than HP. However, Unilever PLC ADR is 1.89 times less risky than HP. It trades about 0.12 of its potential returns per unit of risk. HP Inc is currently generating about 0.06 per unit of risk. If you would invest  4,766  in Unilever PLC ADR on August 7, 2024 and sell it today you would earn a total of  1,365  from holding Unilever PLC ADR or generate 28.64% return on investment over 90 days.

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

Unilever PLC ADR  vs.  HP Inc

Unilever PLC ADR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Unilever PLC ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Unilever PLC is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

HP Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HP Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, HP reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Unilever PLC and HP

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

The idea behind Unilever PLC ADR and HP Inc 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.