Correlation Between Liberty Media and United Utilities
Can any of the company-specific risk be diversified away by investing in both Liberty Media and United Utilities 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 Liberty Media and United Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Liberty Media Corp and United Utilities Group, you can compare the effects of market volatilities on Liberty Media and United Utilities 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 Liberty Media with a short position of United Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Liberty Media and United Utilities.
Diversification Opportunities for Liberty Media and United Utilities
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Liberty and United is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Liberty Media Corp and United Utilities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Utilities and Liberty Media 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 Liberty Media Corp are associated (or correlated) with United Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Utilities has no effect on the direction of Liberty Media i.e., Liberty Media and United Utilities go up and down completely randomly.
Pair Corralation between Liberty Media and United Utilities
Assuming the 90 days trading horizon Liberty Media Corp is expected to generate 1.32 times more return on investment than United Utilities. However, Liberty Media is 1.32 times more volatile than United Utilities Group. It trades about 0.2 of its potential returns per unit of risk. United Utilities Group is currently generating about 0.25 per unit of risk. If you would invest 7,454 in Liberty Media Corp on August 28, 2024 and sell it today you would earn a total of 586.00 from holding Liberty Media Corp or generate 7.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Liberty Media Corp vs. United Utilities Group
Performance |
| Timeline |
| Liberty Media Corp |
| United Utilities |
Liberty Media and United Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Liberty Media and United Utilities
The main advantage of trading using opposite Liberty Media and United Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liberty Media position performs unexpectedly, United Utilities 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 United Utilities will offset losses from the drop in United Utilities' long position.| Liberty Media vs. Samsung Electronics Co | Liberty Media vs. Samsung Electronics Co | Liberty Media vs. Hyundai Motor | Liberty Media vs. Toyota Motor Corp |
| United Utilities vs. Tlou Energy | United Utilities vs. Ikigai Ventures | United Utilities vs. Falcon Oil Gas | United Utilities vs. Golden Metal Resources |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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