Correlation Between Anglo American and Unilever PLC
Can any of the company-specific risk be diversified away by investing in both Anglo American 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 Anglo American and Unilever PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Anglo American PLC and Unilever PLC, you can compare the effects of market volatilities on Anglo American 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 Anglo American with a short position of Unilever PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anglo American and Unilever PLC.
Diversification Opportunities for Anglo American and Unilever PLC
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Anglo and Unilever is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Anglo American PLC and Unilever PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unilever PLC and Anglo American 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 Anglo American PLC 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 Anglo American i.e., Anglo American and Unilever PLC go up and down completely randomly.
Pair Corralation between Anglo American and Unilever PLC
Assuming the 90 days trading horizon Anglo American PLC is expected to generate 2.41 times more return on investment than Unilever PLC. However, Anglo American is 2.41 times more volatile than Unilever PLC. It trades about 0.06 of its potential returns per unit of risk. Unilever PLC is currently generating about 0.1 per unit of risk. If you would invest 189,084 in Anglo American PLC on September 14, 2024 and sell it today you would earn a total of 63,166 from holding Anglo American PLC or generate 33.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Anglo American PLC vs. Unilever PLC
Performance |
| Timeline |
| Anglo American PLC |
| Unilever PLC |
Anglo American and Unilever PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Anglo American and Unilever PLC
The main advantage of trading using opposite Anglo American and Unilever PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anglo American 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.| Anglo American vs. Givaudan SA | Anglo American vs. Antofagasta PLC | Anglo American vs. Ferrexpo PLC | Anglo American vs. Atalaya Mining |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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