Correlation Between Gamma Communications and United Utilities
Can any of the company-specific risk be diversified away by investing in both Gamma 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 Gamma 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 Gamma Communications PLC and United Utilities Group, you can compare the effects of market volatilities on Gamma 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 Gamma Communications with a short position of United Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gamma Communications and United Utilities.
Diversification Opportunities for Gamma Communications and United Utilities
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Gamma and United is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Gamma 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 Gamma 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 Gamma 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 Gamma Communications i.e., Gamma Communications and United Utilities go up and down completely randomly.
Pair Corralation between Gamma Communications and United Utilities
Assuming the 90 days trading horizon Gamma Communications PLC is expected to under-perform the United Utilities. But the stock apears to be less risky and, when comparing its historical volatility, Gamma Communications PLC is 1.41 times less risky than United Utilities. The stock trades about -0.08 of its potential returns per unit of risk. The United Utilities Group is currently generating about 0.32 of returns per unit of risk over similar time horizon. 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 |
Gamma Communications PLC vs. United Utilities Group
Performance |
| Timeline |
| Gamma Communications PLC |
| United Utilities |
Gamma Communications and United Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gamma Communications and United Utilities
The main advantage of trading using opposite Gamma Communications and United Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gamma 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.| Gamma Communications vs. Samsung Electronics Co | Gamma Communications vs. Samsung Electronics Co | Gamma Communications vs. Hyundai Motor | Gamma 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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