Correlation Between N1WL34 and Unilever PLC

Can any of the company-specific risk be diversified away by investing in both N1WL34 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 N1WL34 and Unilever PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between N1WL34 and Unilever PLC, you can compare the effects of market volatilities on N1WL34 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 N1WL34 with a short position of Unilever PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of N1WL34 and Unilever PLC.

Diversification Opportunities for N1WL34 and Unilever PLC

0.27

Correlation Coefficient

N1WL34  Unilever PLC

Modest diversification

The 3 months correlation between N1WL34 and Unilever is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding N1WL34 and Unilever PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unilever PLC and N1WL34 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 N1WL34 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 N1WL34 i.e., N1WL34 and Unilever PLC go up and down completely randomly.

Pair Corralation between N1WL34 and Unilever PLC

Assuming the 90 days trading horizon N1WL34 is expected to generate 2.49 times more return on investment than Unilever PLC. However, N1WL34 is 2.49 times more volatile than Unilever PLC. It trades about 0.05 of its potential returns per unit of risk. Unilever PLC is currently generating about 0.1 per unit of risk. If you would invest  4,400  in N1WL34 on September 26, 2024 and sell it today you would earn a total of  1,798  from holding N1WL34 or generate 40.86% return on investment over 90 days.

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

N1WL34  vs.  Unilever PLC

N1WL34

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in N1WL34 are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, N1WL34 sustained solid returns over the last few months and may actually be approaching a breakup point.

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. Despite somewhat strong technical and fundamental indicators, Unilever PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with N1WL34 and Unilever PLC

The main advantage of trading using opposite N1WL34 and Unilever PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if N1WL34 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 N1WL34 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.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.