Correlation Between Nippon Active and United Utilities
Can any of the company-specific risk be diversified away by investing in both Nippon Active 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 Nippon Active and United Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nippon Active Value and United Utilities Group, you can compare the effects of market volatilities on Nippon Active 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 Nippon Active with a short position of United Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nippon Active and United Utilities.
Diversification Opportunities for Nippon Active and United Utilities
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Nippon and United is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Active Value and United Utilities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Utilities and Nippon Active 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 Nippon Active Value 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 Nippon Active i.e., Nippon Active and United Utilities go up and down completely randomly.
Pair Corralation between Nippon Active and United Utilities
Assuming the 90 days trading horizon Nippon Active Value is expected to generate 0.58 times more return on investment than United Utilities. However, Nippon Active Value is 1.73 times less risky than United Utilities. It trades about 0.13 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 18,350 in Nippon Active Value on September 20, 2024 and sell it today you would earn a total of 350.00 from holding Nippon Active Value or generate 1.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nippon Active Value vs. United Utilities Group
Performance |
| Timeline |
| Nippon Active Value |
| United Utilities |
Nippon Active and United Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nippon Active and United Utilities
The main advantage of trading using opposite Nippon Active and United Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nippon Active 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.| Nippon Active vs. Thor Mining PLC | Nippon Active vs. Hochschild Mining plc | Nippon Active vs. GoldMining | Nippon Active vs. AfriTin Mining |
| United Utilities vs. Toyota Motor Corp | United Utilities vs. SoftBank Group Corp | United Utilities vs. OTP Bank Nyrt | United Utilities vs. Hartford Financial Services |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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