Correlation Between Unilever PLC and Universal Technical
Can any of the company-specific risk be diversified away by investing in both Unilever PLC and Universal Technical 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 Universal Technical 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 Universal Technical Institute, you can compare the effects of market volatilities on Unilever PLC and Universal Technical 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 Universal Technical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unilever PLC and Universal Technical.
Diversification Opportunities for Unilever PLC and Universal Technical
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Unilever and Universal is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC ADR and Universal Technical Institute in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Technical 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 Universal Technical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Technical has no effect on the direction of Unilever PLC i.e., Unilever PLC and Universal Technical go up and down completely randomly.
Pair Corralation between Unilever PLC and Universal Technical
Allowing for the 90-day total investment horizon Unilever PLC is expected to generate 6.27 times less return on investment than Universal Technical. But when comparing it to its historical volatility, Unilever PLC ADR is 2.85 times less risky than Universal Technical. It trades about 0.07 of its potential returns per unit of risk. Universal Technical Institute is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,525 in Universal Technical Institute on September 2, 2024 and sell it today you would earn a total of 1,062 from holding Universal Technical Institute or generate 69.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Unilever PLC ADR vs. Universal Technical Institute
Performance |
| Timeline |
| Unilever PLC ADR |
| Universal Technical |
Unilever PLC and Universal Technical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Unilever PLC and Universal Technical
The main advantage of trading using opposite Unilever PLC and Universal Technical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unilever PLC position performs unexpectedly, Universal Technical 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 Universal Technical will offset losses from the drop in Universal Technical's long position.| Unilever PLC vs. The Clorox | Unilever PLC vs. Colgate Palmolive | Unilever PLC vs. Procter Gamble | Unilever PLC vs. Church Dwight |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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