Correlation Between Cheniere Energy and United Utilities
Can any of the company-specific risk be diversified away by investing in both Cheniere Energy 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 Cheniere Energy and United Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cheniere Energy Partners and United Utilities Group, you can compare the effects of market volatilities on Cheniere Energy 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 Cheniere Energy with a short position of United Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheniere Energy and United Utilities.
Diversification Opportunities for Cheniere Energy and United Utilities
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cheniere and United is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Cheniere Energy Partners and United Utilities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Utilities and Cheniere Energy 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 Cheniere Energy Partners 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 Cheniere Energy i.e., Cheniere Energy and United Utilities go up and down completely randomly.
Pair Corralation between Cheniere Energy and United Utilities
Considering the 90-day investment horizon Cheniere Energy Partners is expected to generate 1.09 times more return on investment than United Utilities. However, Cheniere Energy is 1.09 times more volatile than United Utilities Group. It trades about 0.14 of its potential returns per unit of risk. United Utilities Group is currently generating about 0.03 per unit of risk. If you would invest 4,651 in Cheniere Energy Partners on September 5, 2024 and sell it today you would earn a total of 1,152 from holding Cheniere Energy Partners or generate 24.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.2% |
| Values | Daily Returns |
Cheniere Energy Partners vs. United Utilities Group
Performance |
| Timeline |
| Cheniere Energy Partners |
| United Utilities |
Cheniere Energy and United Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cheniere Energy and United Utilities
The main advantage of trading using opposite Cheniere Energy and United Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheniere Energy 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.| Cheniere Energy vs. EnLink Midstream LLC | Cheniere Energy vs. Plains GP Holdings | Cheniere Energy vs. Hess Midstream Partners | Cheniere Energy vs. Enterprise Products Partners |
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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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