Correlation Between Unilever PLC and Liontrust Asset

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

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

Diversification Opportunities for Unilever PLC and Liontrust Asset

0.56

Correlation Coefficient

Unilever PLC  Liontrust Asset

Very weak diversification

The 3 months correlation between Unilever and Liontrust is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC and Liontrust Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liontrust Asset Mana 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 Liontrust Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liontrust Asset Mana has no effect on the direction of Unilever PLC i.e., Unilever PLC and Liontrust Asset go up and down completely randomly.

Pair Corralation between Unilever PLC and Liontrust Asset

Assuming the 90 days trading horizon Unilever PLC is expected to generate 0.36 times more return on investment than Liontrust Asset. However, Unilever PLC is 2.8 times less risky than Liontrust Asset. It trades about -0.05 of its potential returns per unit of risk. Liontrust Asset Management is currently generating about -0.03 per unit of risk. If you would invest  473,204  in Unilever PLC on October 5, 2024 and sell it today you would lose (14,204) from holding Unilever PLC or give up 3.0% of portfolio value over 90 days.

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

Unilever PLC  vs.  Liontrust Asset Management

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. In spite of comparatively stable basic indicators, Unilever PLC is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Liontrust Asset Mana

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Liontrust Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Liontrust Asset is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Unilever PLC and Liontrust Asset

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

The idea behind Unilever PLC and Liontrust Asset Management 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.