Correlation Between Unilever PLC and Align Technology
Can any of the company-specific risk be diversified away by investing in both Unilever PLC and Align Technology 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 Align Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Unilever PLC and Align Technology, you can compare the effects of market volatilities on Unilever PLC and Align Technology 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 Align Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unilever PLC and Align Technology.
Diversification Opportunities for Unilever PLC and Align Technology
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Unilever and Align is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC and Align Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Align Technology 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 are associated (or correlated) with Align Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Align Technology has no effect on the direction of Unilever PLC i.e., Unilever PLC and Align Technology go up and down completely randomly.
Pair Corralation between Unilever PLC and Align Technology
Assuming the 90 days trading horizon Unilever PLC is expected to generate 1.23 times less return on investment than Align Technology. But when comparing it to its historical volatility, Unilever PLC is 2.15 times less risky than Align Technology. It trades about 0.06 of its potential returns per unit of risk. Align Technology is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 26,367 in Align Technology on September 4, 2024 and sell it today you would earn a total of 8,487 from holding Align Technology or generate 32.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.2% |
| Values | Daily Returns |
Unilever PLC vs. Align Technology
Performance |
| Timeline |
| Unilever PLC |
| Align Technology |
Unilever PLC and Align Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Unilever PLC and Align Technology
The main advantage of trading using opposite Unilever PLC and Align Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unilever PLC position performs unexpectedly, Align Technology 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 Align Technology will offset losses from the drop in Align Technology's long position.| Unilever PLC vs. The Procter Gamble | Unilever PLC vs. The Este Lauder | Unilever PLC vs. Colgate Palmolive | Unilever PLC vs. Coty Inc |
| Align Technology vs. Abbott Laboratories | Align Technology vs. Fundo Investimento Imobiliario | Align Technology vs. Fras le SA | Align Technology vs. Western Digital |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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