Correlation Between Unilever PLC and Este Lauder

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

Diversification Opportunities for Unilever PLC and Este Lauder

0.05

Correlation Coefficient

Unilever PLC  Este Lauder

Significant diversification

The 3 months correlation between Unilever and Este is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC and The Este Lauder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Este Lauder 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 Este Lauder. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Este Lauder has no effect on the direction of Unilever PLC i.e., Unilever PLC and Este Lauder go up and down completely randomly.

Pair Corralation between Unilever PLC and Este Lauder

Assuming the 90 days trading horizon Unilever PLC is expected to generate 0.44 times more return on investment than Este Lauder. However, Unilever PLC is 2.26 times less risky than Este Lauder. It trades about 0.0 of its potential returns per unit of risk. The Este Lauder is currently generating about -0.05 per unit of risk. If you would invest  5,516  in Unilever PLC on December 30, 2024 and sell it today you would lose (42.00) from holding Unilever PLC or give up 0.76% of portfolio value over 90 days.

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

Unilever PLC  vs.  The Este Lauder

Unilever PLC

Risk-Adjusted Performance

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.

Este Lauder

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Este Lauder has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Unilever PLC and Este Lauder

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

The idea behind Unilever PLC and The Este Lauder 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.