Correlation Between PT Unilever and Essity AB

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

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

Diversification Opportunities for PT Unilever and Essity AB

-0.33

Correlation Coefficient

PT Unilever  Essity AB

Very good diversification

The 3 months correlation between UNLRF and Essity is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding PT Unilever Indonesia and Essity AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essity AB and PT Unilever 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 PT Unilever Indonesia are associated (or correlated) with Essity AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essity AB has no effect on the direction of PT Unilever i.e., PT Unilever and Essity AB go up and down completely randomly.

Pair Corralation between PT Unilever and Essity AB

Assuming the 90 days horizon PT Unilever Indonesia is expected to under-perform the Essity AB. But the pink sheet apears to be less risky and, when comparing its historical volatility, PT Unilever Indonesia is 9.31 times less risky than Essity AB. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Essity AB is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,842  in Essity AB on February 9, 2024 and sell it today you would earn a total of  520.00  from holding Essity AB or generate 28.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.88%
Values	Daily Returns

PT Unilever Indonesia  vs.  Essity AB

PT Unilever Indonesia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Unilever Indonesia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Essity AB

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Essity AB are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Essity AB reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Unilever and Essity AB

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

The idea behind PT Unilever Indonesia and Essity 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.