Correlation Between 17 Education and Unilever PLC

Can any of the company-specific risk be diversified away by investing in both 17 Education 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 17 Education and Unilever PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 17 Education Technology and Unilever PLC ADR, you can compare the effects of market volatilities on 17 Education 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 17 Education with a short position of Unilever PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of 17 Education and Unilever PLC.

Diversification Opportunities for 17 Education and Unilever PLC

0.1

Correlation Coefficient

17 Education  Unilever PLC

Average diversification

The 3 months correlation between 17 Education and Unilever is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding 17 Education Technology and Unilever PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unilever PLC ADR and 17 Education 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 17 Education Technology 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 ADR has no effect on the direction of 17 Education i.e., 17 Education and Unilever PLC go up and down completely randomly.

Pair Corralation between 17 Education and Unilever PLC

Allowing for the 90-day total investment horizon 17 Education is expected to generate 10.81 times less return on investment than Unilever PLC. In addition to that, 17 Education is 5.37 times more volatile than Unilever PLC ADR. It trades about 0.01 of its total potential returns per unit of risk. Unilever PLC ADR is currently generating about 0.48 per unit of volatility. If you would invest  4,676  in Unilever PLC ADR on February 12, 2024 and sell it today you would earn a total of  675.00  from holding Unilever PLC ADR or generate 14.44% return on investment over 90 days.

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

17 Education Technology  vs.  Unilever PLC ADR

17 Education Technology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in 17 Education Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, 17 Education reported solid returns over the last few months and may actually be approaching a breakup point.

Unilever PLC ADR

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Unilever PLC ADR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Unilever PLC may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with 17 Education and Unilever PLC

The main advantage of trading using opposite 17 Education and Unilever PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 17 Education 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 17 Education Technology and Unilever PLC ADR 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.