Correlation Between Unilever PLC and LOral SA
Can any of the company-specific risk be diversified away by investing in both Unilever PLC and LOral SA 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 LOral SA 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 LOral SA, you can compare the effects of market volatilities on Unilever PLC and LOral SA 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 LOral SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unilever PLC and LOral SA.
Diversification Opportunities for Unilever PLC and LOral SA
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Unilever and LOral is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC ADR and LOral SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOral SA 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 LOral SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOral SA has no effect on the direction of Unilever PLC i.e., Unilever PLC and LOral SA go up and down completely randomly.
Pair Corralation between Unilever PLC and LOral SA
Allowing for the 90-day total investment horizon Unilever PLC ADR is expected to generate 0.48 times more return on investment than LOral SA. However, Unilever PLC ADR is 2.09 times less risky than LOral SA. It trades about 0.07 of its potential returns per unit of risk. LOral SA is currently generating about -0.13 per unit of risk. If you would invest 5,521 in Unilever PLC ADR on September 3, 2024 and sell it today you would earn a total of 463.00 from holding Unilever PLC ADR or generate 8.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Unilever PLC ADR vs. LOral SA
Performance |
| Timeline |
| Unilever PLC ADR |
| LOral SA |
Unilever PLC and LOral SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Unilever PLC and LOral SA
The main advantage of trading using opposite Unilever PLC and LOral SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unilever PLC position performs unexpectedly, LOral SA 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 LOral SA will offset losses from the drop in LOral SA's long position.| Unilever PLC vs. Highway Holdings Limited | Unilever PLC vs. QCR Holdings | Unilever PLC vs. Partner Communications | Unilever PLC vs. Acumen Pharmaceuticals |
| LOral SA vs. Inter Parfums | LOral SA vs. European Wax Center | LOral SA vs. Estee Lauder Companies | LOral SA vs. Reckitt Benckiser Group |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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