Correlation Between State Bank and Unilever Plc

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

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

Diversification Opportunities for State Bank and Unilever Plc

0.07

Correlation Coefficient

State Bank  Unilever Plc

Significant diversification

The 3 months correlation between State and Unilever is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding State Bank of and Unilever Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unilever Plc and State Bank 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 State Bank of 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 State Bank i.e., State Bank and Unilever Plc go up and down completely randomly.

Pair Corralation between State Bank and Unilever Plc

Assuming the 90 days horizon State Bank of is expected to under-perform the Unilever Plc. But the stock apears to be less risky and, when comparing its historical volatility, State Bank of is 1.01 times less risky than Unilever Plc. The stock trades about -0.15 of its potential returns per unit of risk. The Unilever Plc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  5,430  in Unilever Plc on December 23, 2024 and sell it today you would earn a total of  16.00  from holding Unilever Plc or generate 0.29% return on investment over 90 days.

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

State Bank of  vs.  Unilever Plc

State Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days State Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Unilever Plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Unilever Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Unilever Plc is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with State Bank and Unilever Plc

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

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.