Correlation Between Ford and UNITED UTILITIES
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and UNITED UTILITIES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and UNITED UTILITIES GR, you can compare the effects of market volatilities on Ford 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 Ford with a short position of UNITED UTILITIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and UNITED UTILITIES.
Diversification Opportunities for Ford and UNITED UTILITIES
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ford and UNITED is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and UNITED UTILITIES GR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED UTILITIES and Ford 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 Ford Motor 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 Ford i.e., Ford and UNITED UTILITIES go up and down completely randomly.
Pair Corralation between Ford and UNITED UTILITIES
Taking into account the 90-day investment horizon Ford is expected to generate 2.41 times less return on investment than UNITED UTILITIES. In addition to that, Ford is 1.57 times more volatile than UNITED UTILITIES GR. It trades about 0.01 of its total potential returns per unit of risk. UNITED UTILITIES GR is currently generating about 0.04 per unit of volatility. If you would invest 1,075 in UNITED UTILITIES GR on September 2, 2024 and sell it today you would earn a total of 265.00 from holding UNITED UTILITIES GR or generate 24.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.02% |
| Values | Daily Returns |
Ford Motor vs. UNITED UTILITIES GR
Performance |
| Timeline |
| Ford Motor |
| UNITED UTILITIES |
Ford and UNITED UTILITIES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and UNITED UTILITIES
The main advantage of trading using opposite Ford and UNITED UTILITIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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.The idea behind Ford Motor and UNITED UTILITIES GR pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| UNITED UTILITIES vs. SIVERS SEMICONDUCTORS AB | UNITED UTILITIES vs. Darden Restaurants | UNITED UTILITIES vs. Reliance Steel Aluminum | UNITED UTILITIES vs. Q2M Managementberatung AG |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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