Correlation Between Unilever PLC and Tatton Asset

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

Diversification Opportunities for Unilever PLC and Tatton Asset

-0.14

Correlation Coefficient

Unilever PLC  Tatton Asset

Good diversification

The 3 months correlation between Unilever and Tatton is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC and Tatton Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tatton Asset Management 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 Tatton Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tatton Asset Management has no effect on the direction of Unilever PLC i.e., Unilever PLC and Tatton Asset go up and down completely randomly.

Pair Corralation between Unilever PLC and Tatton Asset

Assuming the 90 days trading horizon Unilever PLC is expected to generate 1.29 times less return on investment than Tatton Asset. But when comparing it to its historical volatility, Unilever PLC is 1.73 times less risky than Tatton Asset. It trades about 0.09 of its potential returns per unit of risk. Tatton Asset Management is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  52,646  in Tatton Asset Management on October 5, 2024 and sell it today you would earn a total of  14,754  from holding Tatton Asset Management or generate 28.02% return on investment over 90 days.

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

Unilever PLC  vs.  Tatton 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.

Tatton Asset Management

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tatton Asset Management are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Tatton 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 Tatton Asset

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

The idea behind Unilever PLC and Tatton 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.