Correlation Between BCE and Unilever PLC

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

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

Diversification Opportunities for BCE and Unilever PLC

0.91

Correlation Coefficient

BCE  Unilever PLC

Almost no diversification

The 3 months correlation between BCE and Unilever is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding BCE Inc and Unilever PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unilever PLC ADR and BCE 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 BCE Inc 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 ADR has no effect on the direction of BCE i.e., BCE and Unilever PLC go up and down completely randomly.

Pair Corralation between BCE and Unilever PLC

Considering the 90-day investment horizon BCE Inc is expected to under-perform the Unilever PLC. In addition to that, BCE is 1.27 times more volatile than Unilever PLC ADR. It trades about -0.18 of its total potential returns per unit of risk. Unilever PLC ADR is currently generating about 0.03 per unit of volatility. If you would invest  5,542  in Unilever PLC ADR on September 22, 2024 and sell it today you would earn a total of  174.00  from holding Unilever PLC ADR or generate 3.14% return on investment over 90 days.

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

BCE Inc  vs.  Unilever PLC ADR

BCE Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BCE Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Unilever PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unilever PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with BCE and Unilever PLC

The main advantage of trading using opposite BCE and Unilever PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BCE 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 BCE Inc and Unilever PLC ADR 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.