Correlation Between Unilever PLC and AMS Small

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

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

Diversification Opportunities for Unilever PLC and AMS Small

-0.45

Correlation Coefficient

Unilever PLC  AMS Small

Very good diversification

The 3 months correlation between Unilever and AMS is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Unilever PLC and AMS Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMS Small Cap 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 AMS Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMS Small Cap has no effect on the direction of Unilever PLC i.e., Unilever PLC and AMS Small go up and down completely randomly.

Pair Corralation between Unilever PLC and AMS Small

Assuming the 90 days trading horizon Unilever PLC is expected to under-perform the AMS Small. But the stock apears to be less risky and, when comparing its historical volatility, Unilever PLC is 1.02 times less risky than AMS Small. The stock trades about -0.17 of its potential returns per unit of risk. The AMS Small Cap is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  138,076  in AMS Small Cap on April 21, 2025 and sell it today you would earn a total of  14,147  from holding AMS Small Cap or generate 10.25% return on investment over 90 days.

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

Unilever PLC  vs.  AMS Small Cap

Pair Trading with Unilever PLC and AMS Small

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

The idea behind Unilever PLC and AMS Small Cap 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 Commodity Directory module to find actively traded commodities issued by global exchanges.