Correlation Between Henkel AG and Unilever PLC
Can any of the company-specific risk be diversified away by investing in both Henkel AG 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 Henkel AG and Unilever PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Henkel AG Co and Unilever PLC ADR, you can compare the effects of market volatilities on Henkel AG 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 Henkel AG with a short position of Unilever PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Henkel AG and Unilever PLC.
Diversification Opportunities for Henkel AG and Unilever PLC
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Henkel and Unilever is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Henkel AG Co 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 Henkel AG 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 Henkel AG Co 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 Henkel AG i.e., Henkel AG and Unilever PLC go up and down completely randomly.
Pair Corralation between Henkel AG and Unilever PLC
Assuming the 90 days horizon Henkel AG Co is expected to generate 1.66 times more return on investment than Unilever PLC. However, Henkel AG is 1.66 times more volatile than Unilever PLC ADR. It trades about 0.18 of its potential returns per unit of risk. Unilever PLC ADR is currently generating about -0.16 per unit of risk. If you would invest 1,843 in Henkel AG Co on September 23, 2024 and sell it today you would earn a total of 82.00 from holding Henkel AG Co or generate 4.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Henkel AG Co vs. Unilever PLC ADR
Performance |
| Timeline |
| Henkel AG |
| Unilever PLC ADR |
Henkel AG and Unilever PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Henkel AG and Unilever PLC
The main advantage of trading using opposite Henkel AG and Unilever PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Henkel AG 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.| Henkel AG vs. LOreal Co ADR | Henkel AG vs. Estee Lauder Companies | Henkel AG vs. Church Dwight | Henkel AG vs. LOral SA |
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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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