Correlation Between Unilever PLC and BKS Bank

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

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

Diversification Opportunities for Unilever PLC and BKS Bank

0.72

Correlation Coefficient

Unilever PLC  BKS Bank

Poor diversification

The 3 months correlation between Unilever and BKS is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC and BKS Bank AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BKS Bank AG 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 BKS Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BKS Bank AG has no effect on the direction of Unilever PLC i.e., Unilever PLC and BKS Bank go up and down completely randomly.

Pair Corralation between Unilever PLC and BKS Bank

Assuming the 90 days trading horizon Unilever PLC is expected to generate 1.74 times more return on investment than BKS Bank. However, Unilever PLC is 1.74 times more volatile than BKS Bank AG. It trades about 0.05 of its potential returns per unit of risk. BKS Bank AG is currently generating about 0.0 per unit of risk. If you would invest  5,608  in Unilever PLC on September 1, 2024 and sell it today you would earn a total of  46.00  from holding Unilever PLC or generate 0.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Unilever PLC  vs.  BKS Bank AG

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 fairly strong forward indicators, Unilever PLC is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

BKS Bank AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BKS Bank AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, BKS Bank is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Unilever PLC and BKS Bank

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

The idea behind Unilever PLC and BKS Bank AG 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.