Correlation Between United Utilities and Fortune Brands
Can any of the company-specific risk be diversified away by investing in both United Utilities and Fortune Brands 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 Fortune Brands 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 Fortune Brands Home, you can compare the effects of market volatilities on United Utilities and Fortune Brands 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 Fortune Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and Fortune Brands.
Diversification Opportunities for United Utilities and Fortune Brands
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between United and Fortune is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Fortune Brands Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortune Brands Home 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 Fortune Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortune Brands Home has no effect on the direction of United Utilities i.e., United Utilities and Fortune Brands go up and down completely randomly.
Pair Corralation between United Utilities and Fortune Brands
Assuming the 90 days trading horizon United Utilities Group is expected to generate 0.76 times more return on investment than Fortune Brands. However, United Utilities Group is 1.32 times less risky than Fortune Brands. It trades about 0.05 of its potential returns per unit of risk. Fortune Brands Home 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 Against |
| Strength | Very Weak |
| Accuracy | 87.5% |
| Values | Daily Returns |
United Utilities Group vs. Fortune Brands Home
Performance |
| Timeline |
| United Utilities |
| Fortune Brands Home |
United Utilities and Fortune Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and Fortune Brands
The main advantage of trading using opposite United Utilities and Fortune Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities position performs unexpectedly, Fortune Brands 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 Fortune Brands will offset losses from the drop in Fortune Brands' long position.| United Utilities vs. Toyota Motor Corp | United Utilities vs. SoftBank Group Corp | United Utilities vs. OTP Bank Nyrt | United Utilities vs. Axon Enterprise |
| Fortune Brands vs. METALL ZUG AG | Fortune Brands vs. Endeavour Mining Corp | Fortune Brands vs. Raytheon Technologies Corp | Fortune Brands vs. Hochschild Mining plc |
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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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