Correlation Between Unilever PLC and Ontex Group
Can any of the company-specific risk be diversified away by investing in both Unilever PLC and Ontex Group 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 Ontex Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Unilever PLC and Ontex Group NV, you can compare the effects of market volatilities on Unilever PLC and Ontex Group 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 Ontex Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unilever PLC and Ontex Group.
Diversification Opportunities for Unilever PLC and Ontex Group
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Unilever and Ontex is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC and Ontex Group NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ontex Group NV 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 Ontex Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ontex Group NV has no effect on the direction of Unilever PLC i.e., Unilever PLC and Ontex Group go up and down completely randomly.
Pair Corralation between Unilever PLC and Ontex Group
Assuming the 90 days trading horizon Unilever PLC is expected to generate 0.76 times more return on investment than Ontex Group. However, Unilever PLC is 1.32 times less risky than Ontex Group. It trades about 0.09 of its potential returns per unit of risk. Ontex Group NV is currently generating about 0.03 per unit of risk. If you would invest 4,165 in Unilever PLC on August 26, 2024 and sell it today you would earn a total of 1,285 from holding Unilever PLC or generate 30.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Unilever PLC vs. Ontex Group NV
Performance |
| Timeline |
| Unilever PLC |
| Ontex Group NV |
Unilever PLC and Ontex Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Unilever PLC and Ontex Group
The main advantage of trading using opposite Unilever PLC and Ontex Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unilever PLC position performs unexpectedly, Ontex Group 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 Ontex Group will offset losses from the drop in Ontex Group's long position.| Unilever PLC vs. Entravision Communications | Unilever PLC vs. Lion One Metals | Unilever PLC vs. Gamma Communications plc | Unilever PLC vs. LION ONE METALS |
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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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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