Correlation Between Natura Co and Unilever PLC

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

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

Diversification Opportunities for Natura Co and Unilever PLC

0.0

Correlation Coefficient

Natura Co  Unilever PLC

Pay attention - limited upside

The 3 months correlation between Natura and Unilever is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Natura Co Holding 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 Natura Co 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 Natura Co Holding 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 Natura Co i.e., Natura Co and Unilever PLC go up and down completely randomly.

Pair Corralation between Natura Co and Unilever PLC

If you would invest  5,629  in Unilever PLC ADR on December 28, 2024 and sell it today you would earn a total of  289.00  from holding Unilever PLC ADR or generate 5.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Natura Co Holding  vs.  Unilever PLC ADR

Natura Co Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Natura Co Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Natura Co is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

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 Natura Co and Unilever PLC

The main advantage of trading using opposite Natura Co and Unilever PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Natura Co 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 Natura Co Holding 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.