Correlation Between United Utilities and Cairn Homes
Can any of the company-specific risk be diversified away by investing in both United Utilities and Cairn Homes 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 Cairn Homes 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 Cairn Homes PLC, you can compare the effects of market volatilities on United Utilities and Cairn Homes 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 Cairn Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and Cairn Homes.
Diversification Opportunities for United Utilities and Cairn Homes
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between United and Cairn is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Cairn Homes PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cairn Homes PLC 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 Cairn Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cairn Homes PLC has no effect on the direction of United Utilities i.e., United Utilities and Cairn Homes go up and down completely randomly.
Pair Corralation between United Utilities and Cairn Homes
Assuming the 90 days trading horizon United Utilities Group is expected to generate 0.86 times more return on investment than Cairn Homes. However, United Utilities Group is 1.16 times less risky than Cairn Homes. It trades about 0.35 of its potential returns per unit of risk. Cairn Homes PLC is currently generating about -0.13 per unit of risk. If you would invest 100,693 in United Utilities Group on September 1, 2024 and sell it today you would earn a total of 11,257 from holding United Utilities Group or generate 11.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Utilities Group vs. Cairn Homes PLC
Performance |
| Timeline |
| United Utilities |
| Cairn Homes PLC |
United Utilities and Cairn Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and Cairn Homes
The main advantage of trading using opposite United Utilities and Cairn Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities position performs unexpectedly, Cairn Homes 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 Cairn Homes will offset losses from the drop in Cairn Homes' long position.| United Utilities vs. Sabre Insurance Group | United Utilities vs. Orient Telecoms | United Utilities vs. Verizon Communications | United Utilities vs. Ross Stores |
| Cairn Homes vs. Rightmove PLC | Cairn Homes vs. Bioventix | Cairn Homes vs. VeriSign | Cairn Homes vs. Games Workshop Group |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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