Correlation Between Centrica PLC and Unilever PLC
Can any of the company-specific risk be diversified away by investing in both Centrica PLC 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 Centrica PLC and Unilever PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Centrica PLC and Unilever PLC, you can compare the effects of market volatilities on Centrica PLC 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 Centrica PLC with a short position of Unilever PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centrica PLC and Unilever PLC.
Diversification Opportunities for Centrica PLC and Unilever PLC
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Centrica and Unilever is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Centrica PLC and Unilever PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unilever PLC and Centrica PLC 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 Centrica 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 Centrica PLC i.e., Centrica PLC and Unilever PLC go up and down completely randomly.
Pair Corralation between Centrica PLC and Unilever PLC
Assuming the 90 days trading horizon Centrica PLC is expected to under-perform the Unilever PLC. In addition to that, Centrica PLC is 1.66 times more volatile than Unilever PLC. It trades about 0.0 of its total potential returns per unit of risk. Unilever PLC is currently generating about 0.1 per unit of volatility. If you would invest 363,940 in Unilever PLC on September 14, 2024 and sell it today you would earn a total of 100,260 from holding Unilever PLC or generate 27.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Centrica PLC vs. Unilever PLC
Performance |
| Timeline |
| Centrica PLC |
| Unilever PLC |
Centrica PLC and Unilever PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Centrica PLC and Unilever PLC
The main advantage of trading using opposite Centrica PLC and Unilever PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Centrica PLC 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.| Centrica PLC vs. Samsung Electronics Co | Centrica PLC vs. Samsung Electronics Co | Centrica PLC vs. Hyundai Motor | Centrica PLC vs. Toyota Motor Corp |
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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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