Correlation Between Unilever PLC and LOreal Co
Can any of the company-specific risk be diversified away by investing in both Unilever PLC and LOreal Co 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 LOreal Co into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Unilever PLC and LOreal Co ADR, you can compare the effects of market volatilities on Unilever PLC and LOreal Co 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 LOreal Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unilever PLC and LOreal Co.
Diversification Opportunities for Unilever PLC and LOreal Co
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Unilever and LOreal is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC and LOreal Co ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOreal Co ADR 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 LOreal Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOreal Co ADR has no effect on the direction of Unilever PLC i.e., Unilever PLC and LOreal Co go up and down completely randomly.
Pair Corralation between Unilever PLC and LOreal Co
Assuming the 90 days horizon Unilever PLC is expected to generate 1.5 times more return on investment than LOreal Co. However, Unilever PLC is 1.5 times more volatile than LOreal Co ADR. It trades about 0.03 of its potential returns per unit of risk. LOreal Co ADR is currently generating about 0.01 per unit of risk. If you would invest 4,690 in Unilever PLC on September 13, 2024 and sell it today you would earn a total of 1,135 from holding Unilever PLC or generate 24.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.77% |
| Values | Daily Returns |
Unilever PLC vs. LOreal Co ADR
Performance |
| Timeline |
| Unilever PLC |
| LOreal Co ADR |
Unilever PLC and LOreal Co Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Unilever PLC and LOreal Co
The main advantage of trading using opposite Unilever PLC and LOreal Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unilever PLC position performs unexpectedly, LOreal Co 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 LOreal Co will offset losses from the drop in LOreal Co's long position.| Unilever PLC vs. LOreal Co ADR | Unilever PLC vs. Estee Lauder Companies | Unilever PLC vs. Church Dwight | Unilever PLC vs. LOral SA |
| LOreal Co vs. V Group | LOreal Co vs. Fbec Worldwide | LOreal Co vs. Hiru Corporation | LOreal Co vs. Alkame Holdings |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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