Correlation Between Unilever PLC and Invesco Health

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

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

Diversification Opportunities for Unilever PLC and Invesco Health

0.66

Correlation Coefficient

Unilever PLC  Invesco Health

Poor diversification

The 3 months correlation between Unilever and Invesco is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC and Invesco Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Health Care 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 Invesco Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Health Care has no effect on the direction of Unilever PLC i.e., Unilever PLC and Invesco Health go up and down completely randomly.

Pair Corralation between Unilever PLC and Invesco Health

Assuming the 90 days trading horizon Unilever PLC is expected to generate 1.42 times more return on investment than Invesco Health. However, Unilever PLC is 1.42 times more volatile than Invesco Health Care. It trades about 0.05 of its potential returns per unit of risk. Invesco Health Care is currently generating about -0.05 per unit of risk. If you would invest  432,873  in Unilever PLC on October 22, 2024 and sell it today you would earn a total of  25,827  from holding Unilever PLC or generate 5.97% return on investment over 90 days.

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

Unilever PLC  vs.  Invesco Health Care

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Invesco Health Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Health Care has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with Unilever PLC and Invesco Health

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

The idea behind Unilever PLC and Invesco Health Care 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.