Correlation Between AIR PRODCHEMICALS and UNITED UTILITIES
Can any of the company-specific risk be diversified away by investing in both AIR PRODCHEMICALS 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 AIR PRODCHEMICALS and UNITED UTILITIES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AIR PRODCHEMICALS and UNITED UTILITIES GR, you can compare the effects of market volatilities on AIR PRODCHEMICALS 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 AIR PRODCHEMICALS with a short position of UNITED UTILITIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIR PRODCHEMICALS and UNITED UTILITIES.
Diversification Opportunities for AIR PRODCHEMICALS and UNITED UTILITIES
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AIR and UNITED is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding AIR PRODCHEMICALS and UNITED UTILITIES GR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED UTILITIES and AIR PRODCHEMICALS 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 AIR PRODCHEMICALS 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 AIR PRODCHEMICALS i.e., AIR PRODCHEMICALS and UNITED UTILITIES go up and down completely randomly.
Pair Corralation between AIR PRODCHEMICALS and UNITED UTILITIES
Assuming the 90 days trading horizon AIR PRODCHEMICALS is expected to generate 1.02 times less return on investment than UNITED UTILITIES. But when comparing it to its historical volatility, AIR PRODCHEMICALS is 1.37 times less risky than UNITED UTILITIES. It trades about 0.49 of its potential returns per unit of risk. UNITED UTILITIES GR is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 1,204 in UNITED UTILITIES GR on September 4, 2024 and sell it today you would earn a total of 136.00 from holding UNITED UTILITIES GR or generate 11.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AIR PRODCHEMICALS vs. UNITED UTILITIES GR
Performance |
| Timeline |
| AIR PRODCHEMICALS |
| UNITED UTILITIES |
AIR PRODCHEMICALS and UNITED UTILITIES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AIR PRODCHEMICALS and UNITED UTILITIES
The main advantage of trading using opposite AIR PRODCHEMICALS and UNITED UTILITIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AIR PRODCHEMICALS 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's long position.| AIR PRODCHEMICALS vs. TOTAL GABON | AIR PRODCHEMICALS vs. Walgreens Boots Alliance | AIR PRODCHEMICALS vs. Peak Resources Limited |
| UNITED UTILITIES vs. TOTAL GABON | UNITED UTILITIES vs. Walgreens Boots Alliance | UNITED UTILITIES vs. Peak Resources Limited |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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