Correlation Between United Utilities and Liberty Media
Can any of the company-specific risk be diversified away by investing in both United Utilities and Liberty Media 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 Liberty Media 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 Liberty Media Corp, you can compare the effects of market volatilities on United Utilities and Liberty Media 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 Liberty Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and Liberty Media.
Diversification Opportunities for United Utilities and Liberty Media
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between United and Liberty is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Liberty Media Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Media Corp 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 Liberty Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Media Corp has no effect on the direction of United Utilities i.e., United Utilities and Liberty Media go up and down completely randomly.
Pair Corralation between United Utilities and Liberty Media
Assuming the 90 days trading horizon United Utilities is expected to generate 1.83 times less return on investment than Liberty Media. But when comparing it to its historical volatility, United Utilities Group is 1.18 times less risky than Liberty Media. It trades about 0.12 of its potential returns per unit of risk. Liberty Media Corp is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 7,349 in Liberty Media Corp on August 24, 2024 and sell it today you would earn a total of 525.00 from holding Liberty Media Corp or generate 7.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Utilities Group vs. Liberty Media Corp
Performance |
| Timeline |
| United Utilities |
| Liberty Media Corp |
United Utilities and Liberty Media Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and Liberty Media
The main advantage of trading using opposite United Utilities and Liberty Media positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities position performs unexpectedly, Liberty Media 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 Liberty Media will offset losses from the drop in Liberty Media's long position.| United Utilities vs. Capital Drilling | United Utilities vs. Odfjell Drilling | United Utilities vs. Baker Steel Resources | United Utilities vs. CompuGroup Medical AG |
| Liberty Media vs. Quadrise Plc | Liberty Media vs. Intuitive Investments Group | Liberty Media vs. European Metals Holdings | Liberty Media vs. Athelney Trust 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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