Correlation Between Albireo Pharma and Unilever PLC

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

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

Diversification Opportunities for Albireo Pharma and Unilever PLC

-0.17

Correlation Coefficient

Albireo Pharma  Unilever PLC

Good diversification

The 3 months correlation between Albireo and Unilever is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Albireo Pharma 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 Albireo Pharma 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 Albireo Pharma 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 Albireo Pharma i.e., Albireo Pharma and Unilever PLC go up and down completely randomly.

Pair Corralation between Albireo Pharma and Unilever PLC

Given the investment horizon of 90 days Albireo Pharma is expected to generate 7.01 times more return on investment than Unilever PLC. However, Albireo Pharma is 7.01 times more volatile than Unilever PLC ADR. It trades about 0.05 of its potential returns per unit of risk. Unilever PLC ADR is currently generating about 0.03 per unit of risk. If you would invest  3,120  in Albireo Pharma on January 26, 2024 and sell it today you would earn a total of  1,295  from holding Albireo Pharma or generate 41.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	41.9%
Values	Daily Returns

Albireo Pharma  vs.  Unilever PLC ADR

Albireo Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Albireo Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, Albireo Pharma is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Unilever PLC ADR

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Unilever PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Unilever PLC is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Albireo Pharma and Unilever PLC

The main advantage of trading using opposite Albireo Pharma and Unilever PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Albireo Pharma 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 Albireo Pharma 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.

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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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.