Correlation Between Procter Gamble and Unilever PLC
Can any of the company-specific risk be diversified away by investing in both Procter Gamble 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 Procter Gamble and Unilever PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Procter Gamble and Unilever PLC ADR, you can compare the effects of market volatilities on Procter Gamble 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 Procter Gamble with a short position of Unilever PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Procter Gamble and Unilever PLC.
Diversification Opportunities for Procter Gamble and Unilever PLC
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Procter and Unilever is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Procter Gamble 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 Procter Gamble 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 Procter Gamble 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 Procter Gamble i.e., Procter Gamble and Unilever PLC go up and down completely randomly.
Pair Corralation between Procter Gamble and Unilever PLC
Allowing for the 90-day total investment horizon Procter Gamble is expected to generate 1.64 times less return on investment than Unilever PLC. But when comparing it to its historical volatility, Procter Gamble is 1.1 times less risky than Unilever PLC. It trades about 0.07 of its potential returns per unit of risk. Unilever PLC ADR is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 4,780 in Unilever PLC ADR on August 27, 2024 and sell it today you would earn a total of 1,081 from holding Unilever PLC ADR or generate 22.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Procter Gamble vs. Unilever PLC ADR
Performance |
| Timeline |
| Procter Gamble |
| Unilever PLC ADR |
Procter Gamble and Unilever PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Procter Gamble and Unilever PLC
The main advantage of trading using opposite Procter Gamble and Unilever PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procter Gamble 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.| Procter Gamble vs. Unilever PLC ADR | Procter Gamble vs. Estee Lauder Companies | Procter Gamble vs. ELF Beauty | Procter Gamble vs. Coty Inc |
| Unilever PLC vs. The Clorox | Unilever PLC vs. Colgate Palmolive | Unilever PLC vs. Procter Gamble | Unilever PLC vs. Church Dwight |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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