Correlation Between Unilever PLC and Kroger

Can any of the company-specific risk be diversified away by investing in both Unilever PLC and Kroger 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 Kroger 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 Kroger Company, you can compare the effects of market volatilities on Unilever PLC and Kroger 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 Kroger. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unilever PLC and Kroger.

Diversification Opportunities for Unilever PLC and Kroger

-0.8

Correlation Coefficient

Unilever PLC  Kroger

Pay attention - limited upside

The 3 months correlation between Unilever and Kroger is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC ADR and Kroger Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kroger Company 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 Kroger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kroger Company has no effect on the direction of Unilever PLC i.e., Unilever PLC and Kroger go up and down completely randomly.

Pair Corralation between Unilever PLC and Kroger

Allowing for the 90-day total investment horizon Unilever PLC ADR is expected to under-perform the Kroger. But the stock apears to be less risky and, when comparing its historical volatility, Unilever PLC ADR is 1.55 times less risky than Kroger. The stock trades about -0.12 of its potential returns per unit of risk. The Kroger Company is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  5,341  in Kroger Company on September 1, 2024 and sell it today you would earn a total of  767.00  from holding Kroger Company or generate 14.36% return on investment over 90 days.

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

Unilever PLC ADR  vs.  Kroger Company

Unilever PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unilever PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Kroger Company

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kroger Company are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Kroger reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Unilever PLC and Kroger

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

The idea behind Unilever PLC ADR and Kroger Company 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..