Correlation Between MTU Aero and Unilever PLC
Can any of the company-specific risk be diversified away by investing in both MTU Aero 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 MTU Aero and Unilever PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MTU Aero Engines and Unilever PLC, you can compare the effects of market volatilities on MTU Aero 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 MTU Aero with a short position of Unilever PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of MTU Aero and Unilever PLC.
Diversification Opportunities for MTU Aero and Unilever PLC
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between MTU and Unilever is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding MTU Aero Engines and Unilever PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unilever PLC and MTU Aero 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 MTU Aero Engines 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 MTU Aero i.e., MTU Aero and Unilever PLC go up and down completely randomly.
Pair Corralation between MTU Aero and Unilever PLC
Assuming the 90 days trading horizon MTU Aero Engines is expected to generate 1.37 times more return on investment than Unilever PLC. However, MTU Aero is 1.37 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 0.05 per unit of risk. If you would invest 21,447 in MTU Aero Engines on November 1, 2024 and sell it today you would earn a total of 11,303 from holding MTU Aero Engines or generate 52.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MTU Aero Engines vs. Unilever PLC
Performance |
| Timeline |
| MTU Aero Engines |
| Unilever PLC |
MTU Aero and Unilever PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MTU Aero and Unilever PLC
The main advantage of trading using opposite MTU Aero and Unilever PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MTU Aero 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.| MTU Aero vs. Carnegie Clean Energy | MTU Aero vs. AECOM TECHNOLOGY | MTU Aero vs. KIMBALL ELECTRONICS | MTU Aero vs. Charter Communications |
| Unilever PLC vs. Lery Seafood Group | Unilever PLC vs. TYSON FOODS A | Unilever PLC vs. Suntory Beverage Food | Unilever PLC vs. United Natural Foods |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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