Correlation Between Unilever PLC and Shiseido
Can any of the company-specific risk be diversified away by investing in both Unilever PLC and Shiseido 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 Shiseido 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 Shiseido Company, you can compare the effects of market volatilities on Unilever PLC and Shiseido 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 Shiseido. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unilever PLC and Shiseido.
Diversification Opportunities for Unilever PLC and Shiseido
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Unilever and Shiseido is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC ADR and Shiseido Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shiseido 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 Shiseido. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shiseido has no effect on the direction of Unilever PLC i.e., Unilever PLC and Shiseido go up and down completely randomly.
Pair Corralation between Unilever PLC and Shiseido
Allowing for the 90-day total investment horizon Unilever PLC ADR is expected to generate 0.51 times more return on investment than Shiseido. However, Unilever PLC ADR is 1.98 times less risky than Shiseido. It trades about -0.24 of its potential returns per unit of risk. Shiseido Company is currently generating about -0.36 per unit of risk. If you would invest 6,204 in Unilever PLC ADR on August 27, 2024 and sell it today you would lose (343.00) from holding Unilever PLC ADR or give up 5.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Unilever PLC ADR vs. Shiseido Company
Performance |
| Timeline |
| Unilever PLC ADR |
| Shiseido |
Unilever PLC and Shiseido Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Unilever PLC and Shiseido
The main advantage of trading using opposite Unilever PLC and Shiseido positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unilever PLC position performs unexpectedly, Shiseido 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 Shiseido will offset losses from the drop in Shiseido's long position.| Unilever PLC vs. The Clorox | Unilever PLC vs. Colgate Palmolive | Unilever PLC vs. Procter Gamble | Unilever PLC vs. Church Dwight |
| Shiseido vs. Reckitt Benckiser Group | Shiseido vs. Church Dwight | Shiseido vs. Kimberly Clark de Mexico | Shiseido vs. LOreal Co 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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