Correlation Between Unilever PLC and Reynolds Consumer
Can any of the company-specific risk be diversified away by investing in both Unilever PLC and Reynolds Consumer 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 Reynolds Consumer 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 Reynolds Consumer Products, you can compare the effects of market volatilities on Unilever PLC and Reynolds Consumer 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 Reynolds Consumer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unilever PLC and Reynolds Consumer.
Diversification Opportunities for Unilever PLC and Reynolds Consumer
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Unilever and Reynolds is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC ADR and Reynolds Consumer Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reynolds Consumer 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 Reynolds Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reynolds Consumer has no effect on the direction of Unilever PLC i.e., Unilever PLC and Reynolds Consumer go up and down completely randomly.
Pair Corralation between Unilever PLC and Reynolds Consumer
Allowing for the 90-day total investment horizon Unilever PLC ADR is expected to generate 0.7 times more return on investment than Reynolds Consumer. However, Unilever PLC ADR is 1.42 times less risky than Reynolds Consumer. It trades about -0.15 of its potential returns per unit of risk. Reynolds Consumer Products is currently generating about -0.11 per unit of risk. If you would invest 6,309 in Unilever PLC ADR on August 23, 2024 and sell it today you would lose (546.00) from holding Unilever PLC ADR or give up 8.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Unilever PLC ADR vs. Reynolds Consumer Products
Performance |
| Timeline |
| Unilever PLC ADR |
| Reynolds Consumer |
Unilever PLC and Reynolds Consumer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Unilever PLC and Reynolds Consumer
The main advantage of trading using opposite Unilever PLC and Reynolds Consumer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unilever PLC position performs unexpectedly, Reynolds Consumer 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 Reynolds Consumer will offset losses from the drop in Reynolds Consumer's long position.| Unilever PLC vs. Honest Company | Unilever PLC vs. Hims Hers Health | Unilever PLC vs. Kimberly Clark | Unilever PLC vs. Colgate Palmolive |
| Reynolds Consumer vs. Greif Bros | Reynolds Consumer vs. Karat Packaging | Reynolds Consumer vs. Silgan Holdings | Reynolds Consumer vs. O I Glass |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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