Correlation Between Unilever PLC and Consumer Products

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

Diversification Opportunities for Unilever PLC and Consumer Products

0.96

Correlation Coefficient

Unilever PLC  Consumer Products

Almost no diversification

The 3 months correlation between Unilever and Consumer is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC ADR and Consumer Products Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Products 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 Consumer Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Products has no effect on the direction of Unilever PLC i.e., Unilever PLC and Consumer Products go up and down completely randomly.

Pair Corralation between Unilever PLC and Consumer Products

Allowing for the 90-day total investment horizon Unilever PLC ADR is expected to generate 1.69 times more return on investment than Consumer Products. However, Unilever PLC is 1.69 times more volatile than Consumer Products Fund. It trades about 0.22 of its potential returns per unit of risk. Consumer Products Fund is currently generating about 0.13 per unit of risk. If you would invest  5,586  in Unilever PLC ADR on June 23, 2024 and sell it today you would earn a total of  855.00  from holding Unilever PLC ADR or generate 15.31% return on investment over 90 days.

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

Unilever PLC ADR  vs.  Consumer Products Fund

Unilever PLC ADR

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Unilever PLC ADR are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Unilever PLC disclosed solid returns over the last few months and may actually be approaching a breakup point.

Consumer Products

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Consumer Products Fund are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Consumer Products is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Unilever PLC and Consumer Products

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

The idea behind Unilever PLC ADR and Consumer Products Fund 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.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.