Correlation Between Unilever PLC and Invesco Physical

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

Diversification Opportunities for Unilever PLC and Invesco Physical

-0.51

Correlation Coefficient

Unilever PLC  Invesco Physical

Excellent diversification

The 3 months correlation between Unilever and Invesco is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC and Invesco Physical Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Physical Gold 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 Physical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Physical Gold has no effect on the direction of Unilever PLC i.e., Unilever PLC and Invesco Physical go up and down completely randomly.

Pair Corralation between Unilever PLC and Invesco Physical

Assuming the 90 days trading horizon Unilever PLC is expected to under-perform the Invesco Physical. But the stock apears to be less risky and, when comparing its historical volatility, Unilever PLC is 1.01 times less risky than Invesco Physical. The stock trades about -0.06 of its potential returns per unit of risk. The Invesco Physical Gold is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  22,393  in Invesco Physical Gold on September 14, 2024 and sell it today you would earn a total of  2,216  from holding Invesco Physical Gold or generate 9.9% return on investment over 90 days.

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

Unilever PLC  vs.  Invesco Physical Gold

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.

Invesco Physical Gold

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Invesco Physical Gold are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Invesco Physical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Unilever PLC and Invesco Physical

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

The idea behind Unilever PLC and Invesco Physical Gold 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.

Check out your portfolio center.

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.