Correlation Between Stephan and Unilever PLC

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

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

Diversification Opportunities for Stephan and Unilever PLC

-0.51

Correlation Coefficient

Stephan  Unilever PLC

Excellent diversification

The 3 months correlation between Stephan and Unilever is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding The Stephan Co and Unilever PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unilever PLC and Stephan 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 The Stephan Co 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 Stephan i.e., Stephan and Unilever PLC go up and down completely randomly.

Pair Corralation between Stephan and Unilever PLC

If you would invest  5,568  in Unilever PLC on September 16, 2024 and sell it today you would earn a total of  416.00  from holding Unilever PLC or generate 7.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	4.76%
Values	Daily Returns

The Stephan Co  vs.  Unilever PLC

The Stephan

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 nearly stable basic indicators, Unilever PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Stephan and Unilever PLC

The main advantage of trading using opposite Stephan and Unilever PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stephan 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 The Stephan Co 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.