Correlation Between United Utilities and Auto Trader
Can any of the company-specific risk be diversified away by investing in both United Utilities and Auto Trader 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 Auto Trader 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 Auto Trader Group, you can compare the effects of market volatilities on United Utilities and Auto Trader 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 Auto Trader. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and Auto Trader.
Diversification Opportunities for United Utilities and Auto Trader
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between United and Auto is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Auto Trader Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auto Trader 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 Auto Trader. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auto Trader Group has no effect on the direction of United Utilities i.e., United Utilities and Auto Trader go up and down completely randomly.
Pair Corralation between United Utilities and Auto Trader
Assuming the 90 days trading horizon United Utilities is expected to generate 1.75 times less return on investment than Auto Trader. In addition to that, United Utilities is 1.49 times more volatile than Auto Trader Group. It trades about 0.08 of its total potential returns per unit of risk. Auto Trader Group is currently generating about 0.22 per unit of volatility. If you would invest 78,940 in Auto Trader Group on September 12, 2024 and sell it today you would earn a total of 3,500 from holding Auto Trader Group or generate 4.43% 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. Auto Trader Group
Performance |
| Timeline |
| United Utilities |
| Auto Trader Group |
United Utilities and Auto Trader Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and Auto Trader
The main advantage of trading using opposite United Utilities and Auto Trader positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities position performs unexpectedly, Auto Trader 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 Auto Trader will offset losses from the drop in Auto Trader's long position.| United Utilities vs. Vitec Software Group | United Utilities vs. Ecofin Global Utilities | United Utilities vs. Everyman Media Group | United Utilities vs. Catena Media PLC |
| Auto Trader vs. Catalyst Media Group | Auto Trader vs. CATLIN GROUP | Auto Trader vs. Tamburi Investment Partners | Auto Trader vs. Magnora ASA |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
Other Complementary Tools
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data |