Correlation Between Unilever PLC and Dingdong ADR
Can any of the company-specific risk be diversified away by investing in both Unilever PLC and Dingdong ADR 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 Dingdong ADR 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 Dingdong ADR, you can compare the effects of market volatilities on Unilever PLC and Dingdong ADR 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 Dingdong ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unilever PLC and Dingdong ADR.
Diversification Opportunities for Unilever PLC and Dingdong ADR
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Unilever and Dingdong is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC ADR and Dingdong ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dingdong ADR 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 Dingdong ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dingdong ADR has no effect on the direction of Unilever PLC i.e., Unilever PLC and Dingdong ADR go up and down completely randomly.
Pair Corralation between Unilever PLC and Dingdong ADR
Allowing for the 90-day total investment horizon Unilever PLC is expected to generate 5.39 times less return on investment than Dingdong ADR. But when comparing it to its historical volatility, Unilever PLC ADR is 4.99 times less risky than Dingdong ADR. It trades about 0.11 of its potential returns per unit of risk. Dingdong ADR is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 141.00 in Dingdong ADR on August 28, 2024 and sell it today you would earn a total of 230.00 from holding Dingdong ADR or generate 163.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Unilever PLC ADR vs. Dingdong ADR
Performance |
| Timeline |
| Unilever PLC ADR |
| Dingdong ADR |
Unilever PLC and Dingdong ADR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Unilever PLC and Dingdong ADR
The main advantage of trading using opposite Unilever PLC and Dingdong ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unilever PLC position performs unexpectedly, Dingdong ADR 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 Dingdong ADR will offset losses from the drop in Dingdong ADR's long position.| Unilever PLC vs. The Clorox | Unilever PLC vs. Colgate Palmolive | Unilever PLC vs. Procter Gamble | Unilever PLC vs. Church Dwight |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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