Correlation Between Unilever PLC and Anheuser Busch

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

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

Diversification Opportunities for Unilever PLC and Anheuser Busch

0.7

Correlation Coefficient

Unilever PLC  Anheuser Busch

Poor diversification

The 3 months correlation between Unilever and Anheuser is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC and Anheuser Busch InBev SANV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anheuser Busch InBev 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 Anheuser Busch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anheuser Busch InBev has no effect on the direction of Unilever PLC i.e., Unilever PLC and Anheuser Busch go up and down completely randomly.

Pair Corralation between Unilever PLC and Anheuser Busch

Assuming the 90 days trading horizon Unilever PLC is expected to generate 0.76 times more return on investment than Anheuser Busch. However, Unilever PLC is 1.32 times less risky than Anheuser Busch. It trades about 0.05 of its potential returns per unit of risk. Anheuser Busch InBev SANV is currently generating about -0.04 per unit of risk. If you would invest  5,272  in Unilever PLC on September 15, 2024 and sell it today you would earn a total of  338.00  from holding Unilever PLC or generate 6.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.24%
Values	Daily Returns

Unilever PLC  vs.  Anheuser Busch InBev SANV

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 fairly strong forward indicators, Unilever PLC is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Anheuser Busch InBev

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anheuser Busch InBev SANV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Unilever PLC and Anheuser Busch

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

The idea behind Unilever PLC and Anheuser Busch InBev SANV 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.