Correlation Between InPlay Oil and United Utilities
Can any of the company-specific risk be diversified away by investing in both InPlay Oil 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 InPlay Oil and United Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between InPlay Oil Corp and United Utilities Group, you can compare the effects of market volatilities on InPlay Oil 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 InPlay Oil with a short position of United Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of InPlay Oil and United Utilities.
Diversification Opportunities for InPlay Oil and United Utilities
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between InPlay and United is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding InPlay Oil 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 InPlay Oil 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 InPlay Oil 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 InPlay Oil i.e., InPlay Oil and United Utilities go up and down completely randomly.
Pair Corralation between InPlay Oil and United Utilities
Assuming the 90 days trading horizon InPlay Oil Corp is expected to generate 1.37 times more return on investment than United Utilities. However, InPlay Oil is 1.37 times more volatile than United Utilities Group. It trades about 0.12 of its potential returns per unit of risk. United Utilities Group is currently generating about -0.1 per unit of risk. If you would invest 109.00 in InPlay Oil Corp on October 11, 2024 and sell it today you would earn a total of 8.00 from holding InPlay Oil Corp or generate 7.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
InPlay Oil Corp vs. United Utilities Group
Performance |
| Timeline |
| InPlay Oil Corp |
| United Utilities |
InPlay Oil and United Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with InPlay Oil and United Utilities
The main advantage of trading using opposite InPlay Oil and United Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InPlay Oil 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.| InPlay Oil vs. CITIC Telecom International | InPlay Oil vs. ecotel communication ag | InPlay Oil vs. PT Wintermar Offshore | InPlay Oil vs. Comba Telecom Systems |
| United Utilities vs. InPlay Oil Corp | United Utilities vs. JD SPORTS FASH | United Utilities vs. Gaming and Leisure | United Utilities vs. Playa Hotels Resorts |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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