Correlation Between MARKET VECTR and Unilever Plc

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

By analyzing existing cross correlation between MARKET VECTR RETAIL and Unilever Plc, you can compare the effects of market volatilities on MARKET VECTR and Unilever Plc 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 MARKET VECTR with a short position of Unilever Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of MARKET VECTR and Unilever Plc.

Diversification Opportunities for MARKET VECTR and Unilever Plc

0.09

Correlation Coefficient

MARKET VECTR  Unilever Plc

Significant diversification

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

Pair Corralation between MARKET VECTR and Unilever Plc

Assuming the 90 days trading horizon MARKET VECTR RETAIL is expected to under-perform the Unilever Plc. But the stock apears to be less risky and, when comparing its historical volatility, MARKET VECTR RETAIL is 1.57 times less risky than Unilever Plc. The stock trades about -0.06 of its potential returns per unit of risk. The Unilever Plc is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  5,465  in Unilever Plc on December 25, 2024 and sell it today you would lose (63.00) from holding Unilever Plc or give up 1.15% of portfolio value over 90 days.

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

MARKET VECTR RETAIL  vs.  Unilever Plc

MARKET VECTR RETAIL

Risk-Adjusted Performance

Very Weak

Over the last 90 days MARKET VECTR RETAIL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, MARKET VECTR is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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 rather sound fundamental drivers, Unilever Plc is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with MARKET VECTR and Unilever Plc

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

The idea behind MARKET VECTR RETAIL and Unilever Plc 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.