Correlation Between United Guardian and Unilever PLC

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Can any of the company-specific risk be diversified away by investing in both United Guardian 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 United Guardian and Unilever PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Guardian and Unilever PLC, you can compare the effects of market volatilities on United Guardian 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 United Guardian with a short position of Unilever PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Guardian and Unilever PLC.

Diversification Opportunities for United Guardian and Unilever PLC

0.6
  Correlation Coefficient

Poor diversification

The 3 months correlation between United and Unilever is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding United-Guardian and Unilever PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unilever PLC and United Guardian 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 United Guardian 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 United Guardian i.e., United Guardian and Unilever PLC go up and down completely randomly.

Pair Corralation between United Guardian and Unilever PLC

Allowing for the 90-day total investment horizon United Guardian is expected to under-perform the Unilever PLC. In addition to that, United Guardian is 1.85 times more volatile than Unilever PLC. It trades about -0.1 of its total potential returns per unit of risk. Unilever PLC is currently generating about 0.08 per unit of volatility. If you would invest  4,967  in Unilever PLC on December 29, 2023 and sell it today you would earn a total of  108.00  from holding Unilever PLC or generate 2.17% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

United-Guardian  vs.  Unilever PLC

 Performance 
       Timeline  
United-Guardian 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in United Guardian are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting technical and fundamental indicators, United Guardian reported solid returns over the last few months and may actually be approaching a breakup point.
Unilever PLC 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Unilever PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Unilever PLC may actually be approaching a critical reversion point that can send shares even higher in April 2024.

United Guardian and Unilever PLC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with United Guardian and Unilever PLC

The main advantage of trading using opposite United Guardian and Unilever PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Guardian 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 United Guardian 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.
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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