Correlation Between Unilever PLC and Hrcules SA

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

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

Diversification Opportunities for Unilever PLC and Hrcules SA

0.08

Correlation Coefficient

Unilever PLC  Hrcules SA

Significant diversification

The 3 months correlation between Unilever and Hrcules is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC and Hrcules SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hrcules SA 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 are associated (or correlated) with Hrcules SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hrcules SA has no effect on the direction of Unilever PLC i.e., Unilever PLC and Hrcules SA go up and down completely randomly.

Pair Corralation between Unilever PLC and Hrcules SA

Assuming the 90 days trading horizon Unilever PLC is expected to generate 2.64 times less return on investment than Hrcules SA. But when comparing it to its historical volatility, Unilever PLC is 3.48 times less risky than Hrcules SA. It trades about 0.05 of its potential returns per unit of risk. Hrcules SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  417.00  in Hrcules SA on September 23, 2024 and sell it today you would earn a total of  213.00  from holding Hrcules SA or generate 51.08% return on investment over 90 days.

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

Unilever PLC  vs.  Hrcules SA

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 somewhat strong technical and fundamental indicators, Unilever PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hrcules SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hrcules SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Preferred 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.

Pair Trading with Unilever PLC and Hrcules SA

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

The idea behind Unilever PLC and Hrcules SA 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 Stocks Directory module to find actively traded stocks across global markets.