Correlation Between Unilever PLC and Costco Wholesale
Can any of the company-specific risk be diversified away by investing in both Unilever PLC and Costco Wholesale 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 Unilever PLC and Costco Wholesale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Unilever PLC ADR and Costco Wholesale Corp, you can compare the effects of market volatilities on Unilever PLC and Costco Wholesale 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 Unilever PLC with a short position of Costco Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unilever PLC and Costco Wholesale.
Diversification Opportunities for Unilever PLC and Costco Wholesale
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Unilever and Costco is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC ADR and Costco Wholesale Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Costco Wholesale Corp and Unilever PLC 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 Unilever PLC ADR are associated (or correlated) with Costco Wholesale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Costco Wholesale Corp has no effect on the direction of Unilever PLC i.e., Unilever PLC and Costco Wholesale go up and down completely randomly.
Pair Corralation between Unilever PLC and Costco Wholesale
Allowing for the 90-day total investment horizon Unilever PLC is expected to generate 2.75 times less return on investment than Costco Wholesale. But when comparing it to its historical volatility, Unilever PLC ADR is 1.6 times less risky than Costco Wholesale. It trades about 0.2 of its potential returns per unit of risk. Costco Wholesale Corp is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 91,951 in Costco Wholesale Corp on September 18, 2024 and sell it today you would earn a total of 6,257 from holding Costco Wholesale Corp or generate 6.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Unilever PLC ADR vs. Costco Wholesale Corp
Performance |
| Timeline |
| Unilever PLC ADR |
| Costco Wholesale Corp |
Unilever PLC and Costco Wholesale Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Unilever PLC and Costco Wholesale
The main advantage of trading using opposite Unilever PLC and Costco Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unilever PLC position performs unexpectedly, Costco Wholesale 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 Costco Wholesale will offset losses from the drop in Costco Wholesale's long position.| Unilever PLC vs. The Clorox | Unilever PLC vs. Colgate Palmolive | Unilever PLC vs. Procter Gamble | Unilever PLC vs. Church Dwight |
| Costco Wholesale vs. Walmart | Costco Wholesale vs. Dollar Tree | Costco Wholesale vs. BJs Wholesale Club | Costco Wholesale vs. Target |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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