Correlation Between Hengan International and Unilever PLC
Can any of the company-specific risk be diversified away by investing in both Hengan International 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 Hengan International and Unilever PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hengan International Group and Unilever PLC ADR, you can compare the effects of market volatilities on Hengan International 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 Hengan International with a short position of Unilever PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hengan International and Unilever PLC.
Diversification Opportunities for Hengan International and Unilever PLC
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Hengan and Unilever is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Hengan International Group 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 Hengan International 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 Hengan International Group 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 Hengan International i.e., Hengan International and Unilever PLC go up and down completely randomly.
Pair Corralation between Hengan International and Unilever PLC
Assuming the 90 days horizon Hengan International Group is expected to under-perform the Unilever PLC. In addition to that, Hengan International is 1.75 times more volatile than Unilever PLC ADR. It trades about -0.05 of its total potential returns per unit of risk. Unilever PLC ADR is currently generating about 0.05 per unit of volatility. If you would invest 4,792 in Unilever PLC ADR on September 4, 2024 and sell it today you would earn a total of 1,199 from holding Unilever PLC ADR or generate 25.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hengan International Group vs. Unilever PLC ADR
Performance |
| Timeline |
| Hengan International |
| Unilever PLC ADR |
Hengan International and Unilever PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hengan International and Unilever PLC
The main advantage of trading using opposite Hengan International and Unilever PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hengan International 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.| Hengan International vs. LOral SA | Hengan International vs. LOreal Co ADR | Hengan International vs. Unilever PLC ADR | Hengan International vs. Kimberly Clark |
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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