Correlation Between Grupo Hotelero and Unilever PLC

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

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

Diversification Opportunities for Grupo Hotelero and Unilever PLC

-0.61

Correlation Coefficient

Grupo Hotelero  Unilever PLC

Excellent diversification

The 3 months correlation between Grupo and Unilever is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Hotelero Santa and Unilever PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unilever PLC and Grupo Hotelero 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 Grupo Hotelero Santa 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 Grupo Hotelero i.e., Grupo Hotelero and Unilever PLC go up and down completely randomly.

Pair Corralation between Grupo Hotelero and Unilever PLC

Assuming the 90 days trading horizon Grupo Hotelero is expected to generate 1.79 times less return on investment than Unilever PLC. In addition to that, Grupo Hotelero is 1.39 times more volatile than Unilever PLC. It trades about 0.03 of its total potential returns per unit of risk. Unilever PLC is currently generating about 0.08 per unit of volatility. If you would invest  97,677  in Unilever PLC on September 12, 2024 and sell it today you would earn a total of  14,323  from holding Unilever PLC or generate 14.66% return on investment over 90 days.

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

Grupo Hotelero Santa  vs.  Unilever PLC

Grupo Hotelero Santa

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Hotelero Santa are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Grupo Hotelero is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Unilever PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unilever PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Grupo Hotelero and Unilever PLC

The main advantage of trading using opposite Grupo Hotelero and Unilever PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Hotelero 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 Grupo Hotelero Santa 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.