Correlation Between United Utilities and Aeorema Communications
Can any of the company-specific risk be diversified away by investing in both United Utilities and Aeorema Communications 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 Aeorema Communications 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 Aeorema Communications Plc, you can compare the effects of market volatilities on United Utilities and Aeorema Communications 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 Aeorema Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and Aeorema Communications.
Diversification Opportunities for United Utilities and Aeorema Communications
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between United and Aeorema is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Aeorema Communications Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeorema Communications 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 Aeorema Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeorema Communications has no effect on the direction of United Utilities i.e., United Utilities and Aeorema Communications go up and down completely randomly.
Pair Corralation between United Utilities and Aeorema Communications
Assuming the 90 days trading horizon United Utilities Group is expected to generate 0.58 times more return on investment than Aeorema Communications. However, United Utilities Group is 1.74 times less risky than Aeorema Communications. It trades about 0.03 of its potential returns per unit of risk. Aeorema Communications Plc is currently generating about -0.02 per unit of risk. If you would invest 99,119 in United Utilities Group on August 31, 2024 and sell it today you would earn a total of 13,831 from holding United Utilities Group or generate 13.95% 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. Aeorema Communications Plc
Performance |
| Timeline |
| United Utilities |
| Aeorema Communications |
United Utilities and Aeorema Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and Aeorema Communications
The main advantage of trading using opposite United Utilities and Aeorema Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities position performs unexpectedly, Aeorema Communications 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 Aeorema Communications will offset losses from the drop in Aeorema Communications' long position.| United Utilities vs. MyHealthChecked Plc | United Utilities vs. PureTech Health plc | United Utilities vs. Abingdon Health Plc | United Utilities vs. Home Depot |
| Aeorema Communications vs. Ironveld Plc | Aeorema Communications vs. Impax Environmental Markets | Aeorema Communications vs. Hochschild Mining plc | Aeorema Communications vs. Endeavour Mining Corp |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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