Correlation Between Unilever PLC and ArcelorMittal

Can any of the company-specific risk be diversified away by investing in both Unilever PLC and ArcelorMittal 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 ArcelorMittal 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 ArcelorMittal SA ADR, you can compare the effects of market volatilities on Unilever PLC and ArcelorMittal 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 ArcelorMittal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unilever PLC and ArcelorMittal.

Diversification Opportunities for Unilever PLC and ArcelorMittal

-0.05

Correlation Coefficient

Unilever PLC  ArcelorMittal

Good diversification

The 3 months correlation between Unilever and ArcelorMittal is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC ADR and ArcelorMittal SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal SA ADR 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 ArcelorMittal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ArcelorMittal SA ADR has no effect on the direction of Unilever PLC i.e., Unilever PLC and ArcelorMittal go up and down completely randomly.

Pair Corralation between Unilever PLC and ArcelorMittal

Allowing for the 90-day total investment horizon Unilever PLC ADR is expected to generate 0.39 times more return on investment than ArcelorMittal. However, Unilever PLC ADR is 2.55 times less risky than ArcelorMittal. It trades about -0.18 of its potential returns per unit of risk. ArcelorMittal SA ADR is currently generating about -0.17 per unit of risk. If you would invest  5,878  in Unilever PLC ADR on September 24, 2024 and sell it today you would lose (162.00) from holding Unilever PLC ADR or give up 2.76% of portfolio value over 90 days.

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

Unilever PLC ADR  vs.  ArcelorMittal SA ADR

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.

ArcelorMittal SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Unilever PLC and ArcelorMittal

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

The idea behind Unilever PLC ADR and ArcelorMittal SA ADR 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.