Correlation Between Unilever PLC and CleanGo Innovations

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

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

Diversification Opportunities for Unilever PLC and CleanGo Innovations

-0.09

Correlation Coefficient

Unilever PLC  CleanGo Innovations

Good diversification

The 3 months correlation between Unilever and CleanGo is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC ADR and CleanGo Innovations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CleanGo Innovations and Unilever PLC 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 Unilever PLC ADR are associated (or correlated) with CleanGo Innovations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CleanGo Innovations has no effect on the direction of Unilever PLC i.e., Unilever PLC and CleanGo Innovations go up and down completely randomly.

Pair Corralation between Unilever PLC and CleanGo Innovations

Allowing for the 90-day total investment horizon Unilever PLC is expected to generate 24.02 times less return on investment than CleanGo Innovations. But when comparing it to its historical volatility, Unilever PLC ADR is 29.33 times less risky than CleanGo Innovations. It trades about 0.06 of its potential returns per unit of risk. CleanGo Innovations is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  32.00  in CleanGo Innovations on December 21, 2024 and sell it today you would lose (20.00) from holding CleanGo Innovations or give up 62.5% of portfolio value over 90 days.

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

Unilever PLC ADR  vs.  CleanGo Innovations

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.

CleanGo Innovations

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CleanGo Innovations are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, CleanGo Innovations reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Unilever PLC and CleanGo Innovations

The main advantage of trading using opposite Unilever PLC and CleanGo Innovations positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unilever PLC position performs unexpectedly, CleanGo Innovations 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 CleanGo Innovations will offset losses from the drop in CleanGo Innovations' long position.

The idea behind Unilever PLC ADR and CleanGo Innovations 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.