Correlation Between Central Garden and Unilever PLC

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

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

Diversification Opportunities for Central Garden and Unilever PLC

-0.52

Correlation Coefficient

Central Garden  Unilever PLC

Excellent diversification

The 3 months correlation between Central and Unilever is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Central Garden Pet 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 Central Garden 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 Central Garden Pet 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 Central Garden i.e., Central Garden and Unilever PLC go up and down completely randomly.

Pair Corralation between Central Garden and Unilever PLC

Given the investment horizon of 90 days Central Garden Pet is expected to generate 2.54 times more return on investment than Unilever PLC. However, Central Garden is 2.54 times more volatile than Unilever PLC ADR. It trades about 0.11 of its potential returns per unit of risk. Unilever PLC ADR is currently generating about -0.04 per unit of risk. If you would invest  3,836  in Central Garden Pet on September 22, 2024 and sell it today you would earn a total of  168.00  from holding Central Garden Pet or generate 4.38% return on investment over 90 days.

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

Central Garden Pet  vs.  Unilever PLC ADR

Central Garden Pet

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Central Garden Pet are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Central Garden may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Central Garden and Unilever PLC

The main advantage of trading using opposite Central Garden and Unilever PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Garden 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 Central Garden Pet 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.