Correlation Between Alphabet and Unilever PLC

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

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

Diversification Opportunities for Alphabet and Unilever PLC

-0.64

Correlation Coefficient

Alphabet  Unilever PLC

Excellent diversification

The 3 months correlation between Alphabet and Unilever is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc and Unilever PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unilever PLC and Alphabet 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 Alphabet Inc 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 Alphabet i.e., Alphabet and Unilever PLC go up and down completely randomly.

Pair Corralation between Alphabet and Unilever PLC

Assuming the 90 days trading horizon Alphabet Inc is expected to generate 1.57 times more return on investment than Unilever PLC. However, Alphabet is 1.57 times more volatile than Unilever PLC. It trades about 0.17 of its potential returns per unit of risk. Unilever PLC is currently generating about -0.12 per unit of risk. If you would invest  325,232  in Alphabet Inc on September 29, 2024 and sell it today you would earn a total of  69,376  from holding Alphabet Inc or generate 21.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

Alphabet Inc  vs.  Unilever PLC

Alphabet

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Alphabet showed solid returns over the last few months and may actually be approaching a breakup point.

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Alphabet and Unilever PLC

The main advantage of trading using opposite Alphabet and Unilever PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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 Alphabet Inc 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .