Correlation Between Kimberly Clark and Unilever PLC

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

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

Diversification Opportunities for Kimberly Clark and Unilever PLC

0.72

Correlation Coefficient

Kimberly Clark  Unilever PLC

Poor diversification

The 3 months correlation between Kimberly and Unilever is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Kimberly Clark and Unilever PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unilever PLC and Kimberly Clark 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 Kimberly Clark 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 Kimberly Clark i.e., Kimberly Clark and Unilever PLC go up and down completely randomly.

Pair Corralation between Kimberly Clark and Unilever PLC

Considering the 90-day investment horizon Kimberly Clark is expected to under-perform the Unilever PLC. But the stock apears to be less risky and, when comparing its historical volatility, Kimberly Clark is 2.93 times less risky than Unilever PLC. The stock trades about -0.13 of its potential returns per unit of risk. The Unilever PLC is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  6,413  in Unilever PLC on September 15, 2024 and sell it today you would lose (429.00) from holding Unilever PLC or give up 6.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Kimberly Clark  vs.  Unilever PLC

Kimberly Clark

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kimberly Clark has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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. Despite nearly stable basic indicators, Unilever PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Kimberly Clark and Unilever PLC

The main advantage of trading using opposite Kimberly Clark and Unilever PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kimberly Clark 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 Kimberly Clark 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.

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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.