Correlation Between Shiseido and Unilever PLC
Can any of the company-specific risk be diversified away by investing in both Shiseido 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 Shiseido and Unilever PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shiseido Company and Unilever PLC ADR, you can compare the effects of market volatilities on Shiseido 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 Shiseido with a short position of Unilever PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shiseido and Unilever PLC.
Diversification Opportunities for Shiseido and Unilever PLC
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Shiseido and Unilever is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Shiseido Company 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 Shiseido 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 Shiseido Company 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 Shiseido i.e., Shiseido and Unilever PLC go up and down completely randomly.
Pair Corralation between Shiseido and Unilever PLC
Assuming the 90 days horizon Shiseido Company is expected to under-perform the Unilever PLC. In addition to that, Shiseido is 1.98 times more volatile than Unilever PLC ADR. It trades about -0.36 of its total potential returns per unit of risk. Unilever PLC ADR is currently generating about -0.24 per unit of volatility. If you would invest 6,204 in Unilever PLC ADR on August 27, 2024 and sell it today you would lose (343.00) from holding Unilever PLC ADR or give up 5.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shiseido Company vs. Unilever PLC ADR
Performance |
| Timeline |
| Shiseido |
| Unilever PLC ADR |
Shiseido and Unilever PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shiseido and Unilever PLC
The main advantage of trading using opposite Shiseido and Unilever PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shiseido 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.| Shiseido vs. Reckitt Benckiser Group | Shiseido vs. Church Dwight | Shiseido vs. Kimberly Clark de Mexico | Shiseido vs. LOreal Co ADR |
| 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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