Correlation Between Nu Skin and Unilever PLC

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

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

Diversification Opportunities for Nu Skin and Unilever PLC

0.29

Correlation Coefficient

Nu Skin  Unilever PLC

Modest diversification

The 3 months correlation between NUS and Unilever is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Nu Skin Enterprises 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 Nu Skin 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 Nu Skin Enterprises 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 Nu Skin i.e., Nu Skin and Unilever PLC go up and down completely randomly.

Pair Corralation between Nu Skin and Unilever PLC

Considering the 90-day investment horizon Nu Skin Enterprises is expected to generate 3.44 times more return on investment than Unilever PLC. However, Nu Skin is 3.44 times more volatile than Unilever PLC ADR. It trades about 0.08 of its potential returns per unit of risk. Unilever PLC ADR is currently generating about 0.06 per unit of risk. If you would invest  698.00  in Nu Skin Enterprises on December 18, 2024 and sell it today you would earn a total of  127.00  from holding Nu Skin Enterprises or generate 18.19% return on investment over 90 days.

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

Nu Skin Enterprises  vs.  Unilever PLC ADR

Nu Skin Enterprises

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nu Skin Enterprises are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Nu Skin unveiled 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 4 (%) 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 Nu Skin and Unilever PLC

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