Correlation Between Unilever PLC and Henkel AG
Can any of the company-specific risk be diversified away by investing in both Unilever PLC and Henkel AG 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 Henkel AG 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 Henkel AG Co, you can compare the effects of market volatilities on Unilever PLC and Henkel AG 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 Henkel AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unilever PLC and Henkel AG.
Diversification Opportunities for Unilever PLC and Henkel AG
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Unilever and Henkel is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC ADR and Henkel AG Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Henkel AG 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 Henkel AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Henkel AG has no effect on the direction of Unilever PLC i.e., Unilever PLC and Henkel AG go up and down completely randomly.
Pair Corralation between Unilever PLC and Henkel AG
Allowing for the 90-day total investment horizon Unilever PLC ADR is expected to generate 0.89 times more return on investment than Henkel AG. However, Unilever PLC ADR is 1.12 times less risky than Henkel AG. It trades about 0.05 of its potential returns per unit of risk. Henkel AG Co is currently generating about 0.04 per unit of risk. If you would invest 4,727 in Unilever PLC ADR on September 3, 2024 and sell it today you would earn a total of 1,257 from holding Unilever PLC ADR or generate 26.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Unilever PLC ADR vs. Henkel AG Co
Performance |
| Timeline |
| Unilever PLC ADR |
| Henkel AG |
Unilever PLC and Henkel AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Unilever PLC and Henkel AG
The main advantage of trading using opposite Unilever PLC and Henkel AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unilever PLC position performs unexpectedly, Henkel AG 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 Henkel AG will offset losses from the drop in Henkel AG's long position.| Unilever PLC vs. Highway Holdings Limited | Unilever PLC vs. QCR Holdings | Unilever PLC vs. Partner Communications | Unilever PLC vs. Acumen Pharmaceuticals |
| Henkel AG vs. Essity AB | Henkel AG vs. Hengan International Group | Henkel AG vs. LOral SA | Henkel AG vs. Beiersdorf AG ADR |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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