Correlation Between Unilever PLC and Prosus NV
Can any of the company-specific risk be diversified away by investing in both Unilever PLC and Prosus NV 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 Prosus NV into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Unilever PLC and Prosus NV, you can compare the effects of market volatilities on Unilever PLC and Prosus NV 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 Prosus NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Unilever PLC and Prosus NV.
Diversification Opportunities for Unilever PLC and Prosus NV
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Unilever and Prosus is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC and Prosus NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosus NV 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 Prosus NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prosus NV has no effect on the direction of Unilever PLC i.e., Unilever PLC and Prosus NV go up and down completely randomly.
Pair Corralation between Unilever PLC and Prosus NV
Assuming the 90 days trading horizon Unilever PLC is expected to under-perform the Prosus NV. But the stock apears to be less risky and, when comparing its historical volatility, Unilever PLC is 1.99 times less risky than Prosus NV. The stock trades about -0.05 of its potential returns per unit of risk. The Prosus NV is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 3,238 in Prosus NV on September 13, 2024 and sell it today you would earn a total of 832.00 from holding Prosus NV or generate 25.69% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Unilever PLC vs. Prosus NV
Performance |
Timeline |
Unilever PLC |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Prosus NV |
Unilever PLC and Prosus NV Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Unilever PLC and Prosus NV
The main advantage of trading using opposite Unilever PLC and Prosus NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unilever PLC position performs unexpectedly, Prosus NV 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 Prosus NV will offset losses from the drop in Prosus NV's long position.Unilever PLC vs. Koninklijke Philips NV | Unilever PLC vs. Koninklijke Ahold Delhaize | Unilever PLC vs. ING Groep NV | Unilever PLC vs. Heineken |
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Check out your portfolio center.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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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