Correlation Between Unilever PLC and Reckitt Benckiser
Can any of the company-specific risk be diversified away by investing in both Unilever PLC and Reckitt Benckiser 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 Reckitt Benckiser 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 Reckitt Benckiser Group, you can compare the effects of market volatilities on Unilever PLC and Reckitt Benckiser 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 Reckitt Benckiser. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unilever PLC and Reckitt Benckiser.
Diversification Opportunities for Unilever PLC and Reckitt Benckiser
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Unilever and Reckitt is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC ADR and Reckitt Benckiser Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reckitt Benckiser 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 Reckitt Benckiser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reckitt Benckiser has no effect on the direction of Unilever PLC i.e., Unilever PLC and Reckitt Benckiser go up and down completely randomly.
Pair Corralation between Unilever PLC and Reckitt Benckiser
Allowing for the 90-day total investment horizon Unilever PLC ADR is expected to generate 0.71 times more return on investment than Reckitt Benckiser. However, Unilever PLC ADR is 1.41 times less risky than Reckitt Benckiser. It trades about -0.08 of its potential returns per unit of risk. Reckitt Benckiser Group is currently generating about -0.14 per unit of risk. If you would invest 6,016 in Unilever PLC ADR on August 24, 2024 and sell it today you would lose (155.00) from holding Unilever PLC ADR or give up 2.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Unilever PLC ADR vs. Reckitt Benckiser Group
Performance |
| Timeline |
| Unilever PLC ADR |
| Reckitt Benckiser |
Unilever PLC and Reckitt Benckiser Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Unilever PLC and Reckitt Benckiser
The main advantage of trading using opposite Unilever PLC and Reckitt Benckiser positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unilever PLC position performs unexpectedly, Reckitt Benckiser 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 Reckitt Benckiser will offset losses from the drop in Reckitt Benckiser's long position.| Unilever PLC vs. Eshallgo Class A | Unilever PLC vs. Amtech Systems | Unilever PLC vs. Gold Fields Ltd | Unilever PLC vs. Aegean Airlines SA |
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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