Correlation Between Unilever PLC and N1WL34

Can any of the company-specific risk be diversified away by investing in both Unilever PLC and N1WL34 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 N1WL34 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Unilever PLC and N1WL34, you can compare the effects of market volatilities on Unilever PLC and N1WL34 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 N1WL34. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unilever PLC and N1WL34.

Diversification Opportunities for Unilever PLC and N1WL34

0.27

Correlation Coefficient

Unilever PLC  N1WL34

Modest diversification

The 3 months correlation between Unilever and N1WL34 is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC and N1WL34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on N1WL34 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 N1WL34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of N1WL34 has no effect on the direction of Unilever PLC i.e., Unilever PLC and N1WL34 go up and down completely randomly.

Pair Corralation between Unilever PLC and N1WL34

Assuming the 90 days trading horizon Unilever PLC is expected to generate 3.31 times less return on investment than N1WL34. But when comparing it to its historical volatility, Unilever PLC is 3.11 times less risky than N1WL34. It trades about 0.12 of its potential returns per unit of risk. N1WL34 is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  5,570  in N1WL34 on September 26, 2024 and sell it today you would earn a total of  628.00  from holding N1WL34 or generate 11.27% return on investment over 90 days.

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

Unilever PLC  vs.  N1WL34

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.

N1WL34

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in N1WL34 are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, N1WL34 sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Unilever PLC and N1WL34

The main advantage of trading using opposite Unilever PLC and N1WL34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unilever PLC position performs unexpectedly, N1WL34 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 N1WL34 will offset losses from the drop in N1WL34's long position.

The idea behind Unilever PLC and N1WL34 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.