Correlation Between Kimberly-Clark and Unilever PLC

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

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

Diversification Opportunities for Kimberly-Clark and Unilever PLC

0.41

Correlation Coefficient

Kimberly-Clark  Unilever PLC

Very weak diversification

The 3 months correlation between Kimberly-Clark and Unilever is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Kimberly Clark de Mexico and Unilever PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unilever PLC and Kimberly-Clark 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 Kimberly Clark de Mexico 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 Kimberly-Clark i.e., Kimberly-Clark and Unilever PLC go up and down completely randomly.

Pair Corralation between Kimberly-Clark and Unilever PLC

Assuming the 90 days horizon Kimberly Clark de Mexico is expected to generate 0.55 times more return on investment than Unilever PLC. However, Kimberly Clark de Mexico is 1.81 times less risky than Unilever PLC. It trades about 0.17 of its potential returns per unit of risk. Unilever PLC is currently generating about 0.03 per unit of risk. If you would invest  706.00  in Kimberly Clark de Mexico on December 29, 2024 and sell it today you would earn a total of  125.00  from holding Kimberly Clark de Mexico or generate 17.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Kimberly Clark de Mexico  vs.  Unilever PLC

Kimberly Clark de

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kimberly Clark de Mexico are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Kimberly-Clark showed solid returns over the last few months and may actually be approaching a breakup point.

Unilever PLC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Unilever PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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 Kimberly-Clark and Unilever PLC

The main advantage of trading using opposite Kimberly-Clark and Unilever PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kimberly-Clark 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 Kimberly Clark de Mexico 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 Transaction History module to view history of all your transactions and understand their impact on performance.