Correlation Between Abingdon Health and United Utilities
Can any of the company-specific risk be diversified away by investing in both Abingdon Health 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 Abingdon Health and United Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Abingdon Health Plc and United Utilities Group, you can compare the effects of market volatilities on Abingdon Health 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 Abingdon Health with a short position of United Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Abingdon Health and United Utilities.
Diversification Opportunities for Abingdon Health and United Utilities
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Abingdon and United is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Abingdon Health Plc and United Utilities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Utilities and Abingdon Health 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 Abingdon Health Plc 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 Abingdon Health i.e., Abingdon Health and United Utilities go up and down completely randomly.
Pair Corralation between Abingdon Health and United Utilities
Assuming the 90 days trading horizon Abingdon Health Plc is expected to generate 3.82 times more return on investment than United Utilities. However, Abingdon Health is 3.82 times more volatile than United Utilities Group. It trades about 0.04 of its potential returns per unit of risk. United Utilities Group is currently generating about 0.04 per unit of risk. If you would invest 425.00 in Abingdon Health Plc on September 2, 2024 and sell it today you would earn a total of 275.00 from holding Abingdon Health Plc or generate 64.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Abingdon Health Plc vs. United Utilities Group
Performance |
| Timeline |
| Abingdon Health Plc |
| United Utilities |
Abingdon Health and United Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Abingdon Health and United Utilities
The main advantage of trading using opposite Abingdon Health and United Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Abingdon Health 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.| Abingdon Health vs. McEwen Mining | Abingdon Health vs. Dentsply Sirona | Abingdon Health vs. Baker Steel Resources | Abingdon Health vs. Blackrock World Mining |
| United Utilities vs. Monks Investment Trust | United Utilities vs. Smithson Investment Trust | United Utilities vs. Ebro Foods | United Utilities vs. Federal Realty Investment |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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