Correlation Between Aeorema Communications and United Utilities
Can any of the company-specific risk be diversified away by investing in both Aeorema Communications 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 Aeorema Communications and United Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aeorema Communications Plc and United Utilities Group, you can compare the effects of market volatilities on Aeorema Communications 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 Aeorema Communications with a short position of United Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aeorema Communications and United Utilities.
Diversification Opportunities for Aeorema Communications and United Utilities
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Aeorema and United is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Aeorema Communications 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 Aeorema Communications 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 Aeorema Communications 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 Aeorema Communications i.e., Aeorema Communications and United Utilities go up and down completely randomly.
Pair Corralation between Aeorema Communications and United Utilities
Assuming the 90 days trading horizon Aeorema Communications is expected to generate 1.65 times less return on investment than United Utilities. In addition to that, Aeorema Communications is 1.04 times more volatile than United Utilities Group. It trades about 0.18 of its total potential returns per unit of risk. United Utilities Group is currently generating about 0.32 per unit of volatility. If you would invest 101,826 in United Utilities Group on September 2, 2024 and sell it today you would earn a total of 10,124 from holding United Utilities Group or generate 9.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aeorema Communications Plc vs. United Utilities Group
Performance |
| Timeline |
| Aeorema Communications |
| United Utilities |
Aeorema Communications and United Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aeorema Communications and United Utilities
The main advantage of trading using opposite Aeorema Communications and United Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aeorema Communications 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.| Aeorema Communications vs. Samsung Electronics Co | Aeorema Communications vs. Samsung Electronics Co | Aeorema Communications vs. Hyundai Motor | Aeorema Communications vs. Toyota Motor Corp |
| 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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