Correlation Between United Utilities and Scandic Hotels
Can any of the company-specific risk be diversified away by investing in both United Utilities and Scandic Hotels 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 Scandic Hotels 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 Scandic Hotels Group, you can compare the effects of market volatilities on United Utilities and Scandic Hotels 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 Scandic Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and Scandic Hotels.
Diversification Opportunities for United Utilities and Scandic Hotels
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between United and Scandic is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Scandic Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandic Hotels Group 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 Scandic Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandic Hotels Group has no effect on the direction of United Utilities i.e., United Utilities and Scandic Hotels go up and down completely randomly.
Pair Corralation between United Utilities and Scandic Hotels
Assuming the 90 days trading horizon United Utilities is expected to generate 3.68 times less return on investment than Scandic Hotels. But when comparing it to its historical volatility, United Utilities Group is 1.43 times less risky than Scandic Hotels. It trades about 0.03 of its potential returns per unit of risk. Scandic Hotels Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3,453 in Scandic Hotels Group on September 3, 2024 and sell it today you would earn a total of 3,269 from holding Scandic Hotels Group or generate 94.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Utilities Group vs. Scandic Hotels Group
Performance |
| Timeline |
| United Utilities |
| Scandic Hotels Group |
United Utilities and Scandic Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and Scandic Hotels
The main advantage of trading using opposite United Utilities and Scandic Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities position performs unexpectedly, Scandic Hotels 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 Scandic Hotels will offset losses from the drop in Scandic Hotels' long position.| United Utilities vs. Hyundai Motor | United Utilities vs. Toyota Motor Corp | United Utilities vs. SoftBank Group Corp | United Utilities vs. Halyk Bank of |
| Scandic Hotels vs. Sealed Air Corp | Scandic Hotels vs. Alaska Air Group | Scandic Hotels vs. Charter Communications Cl | Scandic Hotels vs. Zegona Communications 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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