Correlation Between Unilever PLC and Ametek

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

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

Diversification Opportunities for Unilever PLC and Ametek

-0.69

Correlation Coefficient

Unilever PLC  Ametek

Excellent diversification

The 3 months correlation between Unilever and Ametek is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC and Ametek Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ametek 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 are associated (or correlated) with Ametek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ametek Inc has no effect on the direction of Unilever PLC i.e., Unilever PLC and Ametek go up and down completely randomly.

Pair Corralation between Unilever PLC and Ametek

Assuming the 90 days trading horizon Unilever PLC is expected to generate 0.67 times more return on investment than Ametek. However, Unilever PLC is 1.48 times less risky than Ametek. It trades about 0.09 of its potential returns per unit of risk. Ametek Inc is currently generating about 0.04 per unit of risk. If you would invest  369,937  in Unilever PLC on September 25, 2024 and sell it today you would earn a total of  85,563  from holding Unilever PLC or generate 23.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.2%
Values	Daily Returns

Unilever PLC  vs.  Ametek Inc

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Ametek Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ametek Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Ametek may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Unilever PLC and Ametek

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

The idea behind Unilever PLC and Ametek 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.