Correlation Between Unilever PLC and Inter Parfums

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

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

Diversification Opportunities for Unilever PLC and Inter Parfums

-0.54

Correlation Coefficient

Unilever PLC  Inter Parfums

Excellent diversification

The 3 months correlation between Unilever and Inter is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC and Inter Parfums in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inter Parfums 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 Inter Parfums. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inter Parfums has no effect on the direction of Unilever PLC i.e., Unilever PLC and Inter Parfums go up and down completely randomly.

Pair Corralation between Unilever PLC and Inter Parfums

Assuming the 90 days horizon Unilever PLC is expected to under-perform the Inter Parfums. In addition to that, Unilever PLC is 1.77 times more volatile than Inter Parfums. It trades about -0.04 of its total potential returns per unit of risk. Inter Parfums is currently generating about 0.14 per unit of volatility. If you would invest  11,913  in Inter Parfums on September 14, 2024 and sell it today you would earn a total of  1,771  from holding Inter Parfums or generate 14.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.88%
Values	Daily Returns

Unilever PLC  vs.  Inter Parfums

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 latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Inter Parfums

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Inter Parfums are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Inter Parfums reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Unilever PLC and Inter Parfums

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

The idea behind Unilever PLC and Inter Parfums 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.