Correlation Between Alfa Financial and United Utilities
Can any of the company-specific risk be diversified away by investing in both Alfa Financial 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 Alfa Financial and United Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alfa Financial Software and United Utilities Group, you can compare the effects of market volatilities on Alfa Financial 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 Alfa Financial with a short position of United Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alfa Financial and United Utilities.
Diversification Opportunities for Alfa Financial and United Utilities
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Alfa and United is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Financial Software and United Utilities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Utilities and Alfa Financial 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 Alfa Financial Software 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 Alfa Financial i.e., Alfa Financial and United Utilities go up and down completely randomly.
Pair Corralation between Alfa Financial and United Utilities
Assuming the 90 days trading horizon Alfa Financial Software is expected to under-perform the United Utilities. In addition to that, Alfa Financial is 1.03 times more volatile than United Utilities Group. It trades about -0.25 of its total potential returns per unit of risk. United Utilities Group is currently generating about 0.07 per unit of volatility. If you would invest 96,140 in United Utilities Group on December 23, 2024 and sell it today you would earn a total of 1,780 from holding United Utilities Group or generate 1.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alfa Financial Software vs. United Utilities Group
Performance |
| Timeline |
| Alfa Financial Software |
| United Utilities |
Alfa Financial and United Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alfa Financial and United Utilities
The main advantage of trading using opposite Alfa Financial and United Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alfa Financial 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.| Alfa Financial vs. TT Electronics Plc | Alfa Financial vs. LPKF Laser Electronics | Alfa Financial vs. musicMagpie PLC | Alfa Financial vs. Rheinmetall AG |
| United Utilities vs. Auto Trader Group | United Utilities vs. Target Healthcare REIT | United Utilities vs. OptiBiotix Health Plc | United Utilities vs. Bellevue Healthcare Trust |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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