Correlation Between Beauty Health and Unilever PLC
Can any of the company-specific risk be diversified away by investing in both Beauty Health 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 Beauty Health and Unilever PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Beauty Health Co and Unilever PLC ADR, you can compare the effects of market volatilities on Beauty Health 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 Beauty Health with a short position of Unilever PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beauty Health and Unilever PLC.
Diversification Opportunities for Beauty Health and Unilever PLC
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Beauty and Unilever is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Beauty Health 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 Beauty Health 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 Beauty Health 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 Beauty Health i.e., Beauty Health and Unilever PLC go up and down completely randomly.
Pair Corralation between Beauty Health and Unilever PLC
Given the investment horizon of 90 days Beauty Health Co is expected to under-perform the Unilever PLC. In addition to that, Beauty Health is 6.85 times more volatile than Unilever PLC ADR. It trades about -0.03 of its total potential returns per unit of risk. Unilever PLC ADR is currently generating about 0.07 per unit of volatility. If you would invest 4,765 in Unilever PLC ADR on August 31, 2024 and sell it today you would earn a total of 1,219 from holding Unilever PLC ADR or generate 25.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Beauty Health Co vs. Unilever PLC ADR
Performance |
| Timeline |
| Beauty Health |
| Unilever PLC ADR |
Beauty Health and Unilever PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Beauty Health and Unilever PLC
The main advantage of trading using opposite Beauty Health and Unilever PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beauty Health 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.| Beauty Health vs. Clear Secure | Beauty Health vs. GXO Logistics | Beauty Health vs. Doximity | Beauty Health vs. Figs Inc |
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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