Correlation Between ETFS Coffee and United Utilities
Can any of the company-specific risk be diversified away by investing in both ETFS Coffee 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 ETFS Coffee and United Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ETFS Coffee ETC and United Utilities Group, you can compare the effects of market volatilities on ETFS Coffee 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 ETFS Coffee with a short position of United Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETFS Coffee and United Utilities.
Diversification Opportunities for ETFS Coffee and United Utilities
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ETFS and United is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding ETFS Coffee ETC and United Utilities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Utilities and ETFS Coffee 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 ETFS Coffee ETC 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 ETFS Coffee i.e., ETFS Coffee and United Utilities go up and down completely randomly.
Pair Corralation between ETFS Coffee and United Utilities
Assuming the 90 days trading horizon ETFS Coffee ETC is expected to generate 32.12 times more return on investment than United Utilities. However, ETFS Coffee is 32.12 times more volatile than United Utilities Group. It trades about 0.06 of its potential returns per unit of risk. United Utilities Group is currently generating about 0.04 per unit of risk. If you would invest 97.00 in ETFS Coffee ETC on August 26, 2024 and sell it today you would earn a total of 4,404 from holding ETFS Coffee ETC or generate 4540.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.22% |
| Values | Daily Returns |
ETFS Coffee ETC vs. United Utilities Group
Performance |
| Timeline |
| ETFS Coffee ETC |
| United Utilities |
ETFS Coffee and United Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ETFS Coffee and United Utilities
The main advantage of trading using opposite ETFS Coffee and United Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETFS Coffee 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.| ETFS Coffee vs. SCANSOURCE | ETFS Coffee vs. CHINA TONTINE WINES | ETFS Coffee vs. EIDESVIK OFFSHORE NK | ETFS Coffee vs. SOLSTAD OFFSHORE NK |
| United Utilities vs. VARIOUS EATERIES LS | United Utilities vs. Granite Construction | United Utilities vs. ETFS Coffee ETC | United Utilities vs. Nufarm Limited |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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