Correlation Between Unilever PLC and CVC Capital

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

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

Diversification Opportunities for Unilever PLC and CVC Capital

0.16

Correlation Coefficient

Unilever PLC  CVC Capital

Average diversification

The 3 months correlation between Unilever and CVC is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC and CVC Capital Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVC Capital Partners 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 CVC Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVC Capital Partners has no effect on the direction of Unilever PLC i.e., Unilever PLC and CVC Capital go up and down completely randomly.

Pair Corralation between Unilever PLC and CVC Capital

Assuming the 90 days trading horizon Unilever PLC is expected to generate 1.22 times less return on investment than CVC Capital. But when comparing it to its historical volatility, Unilever PLC is 1.63 times less risky than CVC Capital. It trades about 0.1 of its potential returns per unit of risk. CVC Capital Partners is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,635  in CVC Capital Partners on December 5, 2024 and sell it today you would earn a total of  444.00  from holding CVC Capital Partners or generate 27.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	87.25%
Values	Daily Returns

Unilever PLC  vs.  CVC Capital Partners

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. 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.

CVC Capital Partners

Risk-Adjusted Performance

Very Weak

Over the last 90 days CVC Capital Partners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Unilever PLC and CVC Capital

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

The idea behind Unilever PLC and CVC Capital Partners 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.