Correlation Between Unilever PLC and Procter Gamble

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

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

Diversification Opportunities for Unilever PLC and Procter Gamble

0.31

Correlation Coefficient

Unilever PLC  Procter Gamble

Weak diversification

The 3 months correlation between Unilever and Procter is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC and The Procter Gamble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble 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 Procter Gamble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Procter Gamble has no effect on the direction of Unilever PLC i.e., Unilever PLC and Procter Gamble go up and down completely randomly.

Pair Corralation between Unilever PLC and Procter Gamble

Assuming the 90 days trading horizon Unilever PLC is expected to under-perform the Procter Gamble. In addition to that, Unilever PLC is 1.24 times more volatile than The Procter Gamble. It trades about 0.0 of its total potential returns per unit of risk. The Procter Gamble is currently generating about 0.07 per unit of volatility. If you would invest  6,945  in The Procter Gamble on September 15, 2024 and sell it today you would earn a total of  405.00  from holding The Procter Gamble or generate 5.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Unilever PLC  vs.  The Procter Gamble

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.

Procter Gamble

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Procter Gamble are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Procter Gamble may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Unilever PLC and Procter Gamble

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

The idea behind Unilever PLC and The Procter Gamble 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.

Check out your portfolio center.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.