Correlation Between Axis Bank and Unilever PLC

Can any of the company-specific risk be diversified away by investing in both Axis Bank and Unilever PLC 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 Axis Bank and Unilever PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Axis Bank Ltd and Unilever PLC, you can compare the effects of market volatilities on Axis Bank and Unilever PLC 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 Axis Bank with a short position of Unilever PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axis Bank and Unilever PLC.

Diversification Opportunities for Axis Bank and Unilever PLC

0.67

Correlation Coefficient

Axis Bank  Unilever PLC

Poor diversification

The 3 months correlation between Axis and Unilever is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Axis Bank Ltd and Unilever PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unilever PLC and Axis Bank 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 Axis Bank Ltd are associated (or correlated) with Unilever PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unilever PLC has no effect on the direction of Axis Bank i.e., Axis Bank and Unilever PLC go up and down completely randomly.

Pair Corralation between Axis Bank and Unilever PLC

Assuming the 90 days trading horizon Axis Bank Ltd is expected to under-perform the Unilever PLC. In addition to that, Axis Bank is 1.58 times more volatile than Unilever PLC. It trades about -0.13 of its total potential returns per unit of risk. Unilever PLC is currently generating about -0.07 per unit of volatility. If you would invest  481,438  in Unilever PLC on September 20, 2024 and sell it today you would lose (20,638) from holding Unilever PLC or give up 4.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Axis Bank Ltd  vs.  Unilever PLC

Axis Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Axis Bank Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Unilever PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unilever PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Unilever PLC is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Axis Bank and Unilever PLC

The main advantage of trading using opposite Axis Bank and Unilever PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Axis Bank position performs unexpectedly, Unilever PLC 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 Unilever PLC will offset losses from the drop in Unilever PLC's long position.

The idea behind Axis Bank Ltd and Unilever PLC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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.