Correlation Between Premier Foods and Unilever PLC
Can any of the company-specific risk be diversified away by investing in both Premier Foods 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 Premier Foods and Unilever PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Premier Foods PLC and Unilever PLC, you can compare the effects of market volatilities on Premier Foods 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 Premier Foods with a short position of Unilever PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premier Foods and Unilever PLC.
Diversification Opportunities for Premier Foods and Unilever PLC
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Premier and Unilever is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Premier Foods PLC and Unilever PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unilever PLC and Premier Foods 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 Premier Foods PLC 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 Premier Foods i.e., Premier Foods and Unilever PLC go up and down completely randomly.
Pair Corralation between Premier Foods and Unilever PLC
Assuming the 90 days trading horizon Premier Foods PLC is expected to generate 1.3 times more return on investment than Unilever PLC. However, Premier Foods is 1.3 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 -0.06 per unit of risk. If you would invest 18,160 in Premier Foods PLC on October 7, 2024 and sell it today you would earn a total of 620.00 from holding Premier Foods PLC or generate 3.41% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Premier Foods PLC vs. Unilever PLC
Performance |
Timeline |
Premier Foods PLC |
Unilever PLC |
Premier Foods and Unilever PLC Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Premier Foods and Unilever PLC
The main advantage of trading using opposite Premier Foods and Unilever PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Premier Foods 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.Premier Foods vs. Universal Display Corp | Premier Foods vs. mobilezone holding AG | Premier Foods vs. Batm Advanced Communications | Premier Foods vs. United States Steel |
Unilever PLC vs. Westlake Chemical Corp | Unilever PLC vs. Liontrust Asset Management | Unilever PLC vs. Jupiter Fund Management | Unilever PLC vs. Spotify Technology SA |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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