Correlation Between Unilever PLC and BRC

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

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

Diversification Opportunities for Unilever PLC and BRC

0.87

Correlation Coefficient

Unilever PLC  BRC

Very poor diversification

The 3 months correlation between Unilever and BRC is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC ADR and BRC Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRC Inc and Unilever PLC 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 Unilever PLC ADR are associated (or correlated) with BRC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRC Inc has no effect on the direction of Unilever PLC i.e., Unilever PLC and BRC go up and down completely randomly.

Pair Corralation between Unilever PLC and BRC

Allowing for the 90-day total investment horizon Unilever PLC ADR is expected to generate 0.2 times more return on investment than BRC. However, Unilever PLC ADR is 4.97 times less risky than BRC. It trades about 0.1 of its potential returns per unit of risk. BRC Inc is currently generating about 0.01 per unit of risk. If you would invest  4,611  in Unilever PLC ADR on September 13, 2024 and sell it today you would earn a total of  1,267  from holding Unilever PLC ADR or generate 27.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Unilever PLC ADR  vs.  BRC Inc

Unilever PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unilever PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

BRC Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BRC Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, BRC is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Unilever PLC and BRC

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

The idea behind Unilever PLC ADR and BRC Inc 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.