Correlation Between Unilever PLC and Hengan International
Can any of the company-specific risk be diversified away by investing in both Unilever PLC and Hengan International 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 Hengan International 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 Hengan International Group, you can compare the effects of market volatilities on Unilever PLC and Hengan International 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 Hengan International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unilever PLC and Hengan International.
Diversification Opportunities for Unilever PLC and Hengan International
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Unilever and Hengan is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC ADR and Hengan International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hengan International 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 Hengan International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hengan International has no effect on the direction of Unilever PLC i.e., Unilever PLC and Hengan International go up and down completely randomly.
Pair Corralation between Unilever PLC and Hengan International
Allowing for the 90-day total investment horizon Unilever PLC ADR is expected to generate 0.65 times more return on investment than Hengan International. However, Unilever PLC ADR is 1.53 times less risky than Hengan International. It trades about -0.06 of its potential returns per unit of risk. Hengan International Group is currently generating about -0.1 per unit of risk. If you would invest 6,082 in Unilever PLC ADR on September 4, 2024 and sell it today you would lose (91.00) from holding Unilever PLC ADR or give up 1.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Unilever PLC ADR vs. Hengan International Group
Performance |
| Timeline |
| Unilever PLC ADR |
| Hengan International |
Unilever PLC and Hengan International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Unilever PLC and Hengan International
The main advantage of trading using opposite Unilever PLC and Hengan International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unilever PLC position performs unexpectedly, Hengan International 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 Hengan International will offset losses from the drop in Hengan International's long position.| Unilever PLC vs. Colgate Palmolive | Unilever PLC vs. Estee Lauder Companies | Unilever PLC vs. Procter Gamble | Unilever PLC vs. United Guardian |
| Hengan International vs. LOral SA | Hengan International vs. LOreal Co ADR | Hengan International vs. Unilever PLC ADR | Hengan International vs. Kimberly Clark |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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