Correlation Between Kenvue and Unilever PLC

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

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

Diversification Opportunities for Kenvue and Unilever PLC

0.42

Correlation Coefficient

Kenvue  Unilever PLC

Very weak diversification

The 3 months correlation between Kenvue and Unilever is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Kenvue 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 Kenvue 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 Kenvue 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 Kenvue i.e., Kenvue and Unilever PLC go up and down completely randomly.

Pair Corralation between Kenvue and Unilever PLC

Given the investment horizon of 90 days Kenvue Inc is expected to generate 1.12 times more return on investment than Unilever PLC. However, Kenvue is 1.12 times more volatile than Unilever PLC ADR. It trades about 0.15 of its potential returns per unit of risk. Unilever PLC ADR is currently generating about 0.07 per unit of risk. If you would invest  2,097  in Kenvue Inc on December 28, 2024 and sell it today you would earn a total of  273.00  from holding Kenvue Inc or generate 13.02% return on investment over 90 days.

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

Kenvue Inc  vs.  Unilever PLC ADR

Kenvue Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kenvue Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Kenvue exhibited solid returns over the last few months and may actually be approaching a breakup point.

Unilever PLC ADR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Unilever PLC ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Unilever PLC is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Kenvue and Unilever PLC

The main advantage of trading using opposite Kenvue and Unilever PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kenvue 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 Kenvue 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.