Correlation Between Unilever PLC and SYSTEMAIR

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

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

Diversification Opportunities for Unilever PLC and SYSTEMAIR

-0.09

Correlation Coefficient

Unilever PLC  SYSTEMAIR

Good diversification

The 3 months correlation between Unilever and SYSTEMAIR is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC and SYSTEMAIR AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SYSTEMAIR AB 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 SYSTEMAIR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SYSTEMAIR AB has no effect on the direction of Unilever PLC i.e., Unilever PLC and SYSTEMAIR go up and down completely randomly.

Pair Corralation between Unilever PLC and SYSTEMAIR

Assuming the 90 days trading horizon Unilever PLC is expected to under-perform the SYSTEMAIR. But the stock apears to be less risky and, when comparing its historical volatility, Unilever PLC is 1.25 times less risky than SYSTEMAIR. The stock trades about -0.02 of its potential returns per unit of risk. The SYSTEMAIR AB is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  704.00  in SYSTEMAIR AB on September 5, 2024 and sell it today you would earn a total of  86.00  from holding SYSTEMAIR AB or generate 12.22% return on investment over 90 days.

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

Unilever PLC  vs.  SYSTEMAIR AB

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 nearly stable basic indicators, Unilever PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

SYSTEMAIR AB

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SYSTEMAIR AB are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, SYSTEMAIR may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Unilever PLC and SYSTEMAIR

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

The idea behind Unilever PLC and SYSTEMAIR AB 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.