Correlation Between United Utilities and Beazer Homes
Can any of the company-specific risk be diversified away by investing in both United Utilities and Beazer Homes 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 United Utilities and Beazer Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Utilities Group and Beazer Homes USA, you can compare the effects of market volatilities on United Utilities and Beazer Homes 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 United Utilities with a short position of Beazer Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and Beazer Homes.
Diversification Opportunities for United Utilities and Beazer Homes
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and Beazer is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Beazer Homes USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beazer Homes USA and United Utilities 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 United Utilities Group are associated (or correlated) with Beazer Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beazer Homes USA has no effect on the direction of United Utilities i.e., United Utilities and Beazer Homes go up and down completely randomly.
Pair Corralation between United Utilities and Beazer Homes
Assuming the 90 days trading horizon United Utilities Group is expected to generate 0.41 times more return on investment than Beazer Homes. However, United Utilities Group is 2.43 times less risky than Beazer Homes. It trades about 0.05 of its potential returns per unit of risk. Beazer Homes USA is currently generating about 0.01 per unit of risk. If you would invest 103,746 in United Utilities Group on September 12, 2024 and sell it today you would earn a total of 4,054 from holding United Utilities Group or generate 3.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 65.63% |
| Values | Daily Returns |
United Utilities Group vs. Beazer Homes USA
Performance |
| Timeline |
| United Utilities |
| Beazer Homes USA |
United Utilities and Beazer Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and Beazer Homes
The main advantage of trading using opposite United Utilities and Beazer Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities position performs unexpectedly, Beazer Homes 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 Beazer Homes will offset losses from the drop in Beazer Homes' long position.| United Utilities vs. Toyota Motor Corp | United Utilities vs. SoftBank Group Corp | United Utilities vs. OTP Bank Nyrt | United Utilities vs. Hartford Financial Services |
| Beazer Homes vs. Samsung Electronics Co | Beazer Homes vs. Samsung Electronics Co | Beazer Homes vs. Hyundai Motor | Beazer Homes vs. Reliance Industries Ltd |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated |