Correlation Between Sabre Insurance and Unilever PLC

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

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

Diversification Opportunities for Sabre Insurance and Unilever PLC

0.63

Correlation Coefficient

Sabre Insurance  Unilever PLC

Poor diversification

The 3 months correlation between Sabre and Unilever is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sabre Insurance Group and Unilever PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unilever PLC and Sabre Insurance 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 Sabre Insurance Group 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 Sabre Insurance i.e., Sabre Insurance and Unilever PLC go up and down completely randomly.

Pair Corralation between Sabre Insurance and Unilever PLC

Assuming the 90 days trading horizon Sabre Insurance Group is expected to generate 1.81 times more return on investment than Unilever PLC. However, Sabre Insurance is 1.81 times more volatile than Unilever PLC. It trades about 0.13 of its potential returns per unit of risk. Unilever PLC is currently generating about 0.02 per unit of risk. If you would invest  13,100  in Sabre Insurance Group on September 22, 2024 and sell it today you would earn a total of  600.00  from holding Sabre Insurance Group or generate 4.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Sabre Insurance Group  vs.  Unilever PLC

Sabre Insurance Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

The main advantage of trading using opposite Sabre Insurance and Unilever PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sabre Insurance 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 Sabre Insurance Group 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.