Correlation Between BC IRON and Unilever PLC

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

By analyzing existing cross correlation between BC IRON and Unilever PLC, you can compare the effects of market volatilities on BC IRON and Unilever PLC 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 BC IRON with a short position of Unilever PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of BC IRON and Unilever PLC.

Diversification Opportunities for BC IRON and Unilever PLC

0.05

Correlation Coefficient

BC IRON  Unilever PLC

Significant diversification

The 3 months correlation between BC3 and Unilever is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding BC IRON and Unilever PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unilever PLC and BC IRON 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 BC IRON are associated (or correlated) with Unilever PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unilever PLC has no effect on the direction of BC IRON i.e., BC IRON and Unilever PLC go up and down completely randomly.

Pair Corralation between BC IRON and Unilever PLC

Assuming the 90 days trading horizon BC IRON is expected to under-perform the Unilever PLC. In addition to that, BC IRON is 1.55 times more volatile than Unilever PLC. It trades about -0.09 of its total potential returns per unit of risk. Unilever PLC is currently generating about 0.01 per unit of volatility. If you would invest  5,356  in Unilever PLC on December 22, 2024 and sell it today you would lose (6.00) from holding Unilever PLC or give up 0.11% of portfolio value over 90 days.

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

BC IRON  vs.  Unilever PLC

BC IRON

Risk-Adjusted Performance

Very Weak

Over the last 90 days BC IRON has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Unilever PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Unilever PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Unilever PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BC IRON and Unilever PLC

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

The idea behind BC IRON and Unilever PLC 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.