Correlation Between TomTom NV and Unilever PLC

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

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

Diversification Opportunities for TomTom NV and Unilever PLC

-0.02

Correlation Coefficient

TomTom NV  Unilever PLC

Good diversification

The 3 months correlation between TomTom and Unilever is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding TomTom NV and Unilever PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unilever PLC and TomTom NV 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 TomTom NV 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 TomTom NV i.e., TomTom NV and Unilever PLC go up and down completely randomly.

Pair Corralation between TomTom NV and Unilever PLC

Assuming the 90 days trading horizon TomTom NV is expected to under-perform the Unilever PLC. In addition to that, TomTom NV is 2.88 times more volatile than Unilever PLC. It trades about -0.05 of its total potential returns per unit of risk. Unilever PLC is currently generating about -0.08 per unit of volatility. If you would invest  5,682  in Unilever PLC on November 28, 2024 and sell it today you would lose (346.00) from holding Unilever PLC or give up 6.09% of portfolio value over 90 days.

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

TomTom NV  vs.  Unilever PLC

TomTom NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days TomTom NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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 comparatively stable basic indicators, Unilever PLC is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with TomTom NV and Unilever PLC

The main advantage of trading using opposite TomTom NV and Unilever PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TomTom NV 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 TomTom NV 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.