Correlation Between Nasdaq and Unilever Plc

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

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

Diversification Opportunities for Nasdaq and Unilever Plc

-0.52

Correlation Coefficient

Nasdaq  Unilever Plc

Excellent diversification

The 3 months correlation between Nasdaq and Unilever is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Unilever Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unilever Plc and Nasdaq 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 Nasdaq 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 Nasdaq i.e., Nasdaq and Unilever Plc go up and down completely randomly.

Pair Corralation between Nasdaq and Unilever Plc

Given the investment horizon of 90 days Nasdaq Inc is expected to under-perform the Unilever Plc. In addition to that, Nasdaq is 1.37 times more volatile than Unilever Plc. It trades about -0.22 of its total potential returns per unit of risk. Unilever Plc is currently generating about -0.1 per unit of volatility. If you would invest  5,606  in Unilever Plc on September 24, 2024 and sell it today you would lose (94.00) from holding Unilever Plc or give up 1.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Nasdaq Inc  vs.  Unilever Plc

Nasdaq Inc

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Nasdaq is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail 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 Nasdaq and Unilever Plc

The main advantage of trading using opposite Nasdaq and Unilever Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 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 Nasdaq 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..