Correlation Between IMPERIAL TOBACCO and United Utilities
Can any of the company-specific risk be diversified away by investing in both IMPERIAL TOBACCO 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 IMPERIAL TOBACCO and United Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IMPERIAL TOBACCO and United Utilities Group, you can compare the effects of market volatilities on IMPERIAL TOBACCO 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 IMPERIAL TOBACCO with a short position of United Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of IMPERIAL TOBACCO and United Utilities.
Diversification Opportunities for IMPERIAL TOBACCO and United Utilities
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IMPERIAL and United is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding IMPERIAL TOBACCO and United Utilities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Utilities and IMPERIAL TOBACCO 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 IMPERIAL TOBACCO 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 IMPERIAL TOBACCO i.e., IMPERIAL TOBACCO and United Utilities go up and down completely randomly.
Pair Corralation between IMPERIAL TOBACCO and United Utilities
Assuming the 90 days trading horizon IMPERIAL TOBACCO is expected to generate 0.51 times more return on investment than United Utilities. However, IMPERIAL TOBACCO is 1.97 times less risky than United Utilities. It trades about 0.3 of its potential returns per unit of risk. United Utilities Group is currently generating about 0.06 per unit of risk. If you would invest 3,106 in IMPERIAL TOBACCO on November 27, 2024 and sell it today you would earn a total of 175.00 from holding IMPERIAL TOBACCO or generate 5.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
IMPERIAL TOBACCO vs. United Utilities Group
Performance |
| Timeline |
| IMPERIAL TOBACCO |
| United Utilities |
IMPERIAL TOBACCO and United Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IMPERIAL TOBACCO and United Utilities
The main advantage of trading using opposite IMPERIAL TOBACCO and United Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IMPERIAL TOBACCO 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.| IMPERIAL TOBACCO vs. CVW CLEANTECH INC | IMPERIAL TOBACCO vs. Jacquet Metal Service | IMPERIAL TOBACCO vs. Sims Metal Management | IMPERIAL TOBACCO vs. Waste Management |
| United Utilities vs. MAG Silver Corp | United Utilities vs. INSURANCE AUST GRP | United Utilities vs. UNIQA INSURANCE GR | United Utilities vs. Aya Gold Silver |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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