Correlation Between Universal Entertainment and United Utilities
Can any of the company-specific risk be diversified away by investing in both Universal Entertainment 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 Universal Entertainment and United Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Universal Entertainment and United Utilities Group, you can compare the effects of market volatilities on Universal Entertainment 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 Universal Entertainment with a short position of United Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Universal Entertainment and United Utilities.
Diversification Opportunities for Universal Entertainment and United Utilities
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Universal and United is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Universal Entertainment and United Utilities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Utilities and Universal Entertainment 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 Universal Entertainment 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 Universal Entertainment i.e., Universal Entertainment and United Utilities go up and down completely randomly.
Pair Corralation between Universal Entertainment and United Utilities
Assuming the 90 days trading horizon Universal Entertainment is expected to under-perform the United Utilities. In addition to that, Universal Entertainment is 1.52 times more volatile than United Utilities Group. It trades about -0.08 of its total potential returns per unit of risk. United Utilities Group is currently generating about 0.03 per unit of volatility. If you would invest 1,136 in United Utilities Group on September 4, 2024 and sell it today you would earn a total of 204.00 from holding United Utilities Group or generate 17.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.74% |
| Values | Daily Returns |
Universal Entertainment vs. United Utilities Group
Performance |
| Timeline |
| Universal Entertainment |
| United Utilities |
Universal Entertainment and United Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Universal Entertainment and United Utilities
The main advantage of trading using opposite Universal Entertainment and United Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Entertainment 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.| Universal Entertainment vs. TOTAL GABON | Universal Entertainment vs. Walgreens Boots Alliance | Universal Entertainment vs. Peak Resources Limited |
| United Utilities vs. Superior Plus Corp | United Utilities vs. NMI Holdings | United Utilities vs. Origin Agritech | United Utilities vs. SIVERS SEMICONDUCTORS AB |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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