Correlation Between Volkswagen and United Utilities
Can any of the company-specific risk be diversified away by investing in both Volkswagen 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 Volkswagen and United Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volkswagen AG and United Utilities Group, you can compare the effects of market volatilities on Volkswagen 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 Volkswagen with a short position of United Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and United Utilities.
Diversification Opportunities for Volkswagen and United Utilities
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Volkswagen and United is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG and United Utilities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Utilities and Volkswagen 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 Volkswagen AG 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 Volkswagen i.e., Volkswagen and United Utilities go up and down completely randomly.
Pair Corralation between Volkswagen and United Utilities
Assuming the 90 days trading horizon Volkswagen AG is expected to generate 0.75 times more return on investment than United Utilities. However, Volkswagen AG is 1.33 times less risky than United Utilities. It trades about 0.33 of its potential returns per unit of risk. United Utilities Group is currently generating about -0.12 per unit of risk. If you would invest 9,115 in Volkswagen AG on November 1, 2024 and sell it today you would earn a total of 945.00 from holding Volkswagen AG or generate 10.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Volkswagen AG vs. United Utilities Group
Performance |
| Timeline |
| Volkswagen AG |
| United Utilities |
Volkswagen and United Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Volkswagen and United Utilities
The main advantage of trading using opposite Volkswagen and United Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen 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.| Volkswagen vs. Morgan Advanced Materials | Volkswagen vs. Mobile Tornado Group | Volkswagen vs. Spirent Communications plc | Volkswagen vs. Aeorema Communications Plc |
| United Utilities vs. Alfa Financial Software | United Utilities vs. Eastman Chemical Co | United Utilities vs. Compagnie Plastic Omnium | United Utilities vs. Auction Technology Group |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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