Correlation Between United Utilities and JD Sports
Can any of the company-specific risk be diversified away by investing in both United Utilities and JD Sports 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 JD Sports 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 JD Sports Fashion, you can compare the effects of market volatilities on United Utilities and JD Sports 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 JD Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and JD Sports.
Diversification Opportunities for United Utilities and JD Sports
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between United and JD Sports is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and JD Sports Fashion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Sports Fashion 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 JD Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD Sports Fashion has no effect on the direction of United Utilities i.e., United Utilities and JD Sports go up and down completely randomly.
Pair Corralation between United Utilities and JD Sports
Assuming the 90 days trading horizon United Utilities Group is expected to generate 0.41 times more return on investment than JD Sports. However, United Utilities Group is 2.42 times less risky than JD Sports. It trades about 0.12 of its potential returns per unit of risk. JD Sports Fashion is currently generating about -0.11 per unit of risk. If you would invest 101,333 in United Utilities Group on September 4, 2024 and sell it today you would earn a total of 10,067 from holding United Utilities Group or generate 9.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Utilities Group vs. JD Sports Fashion
Performance |
| Timeline |
| United Utilities |
| JD Sports Fashion |
United Utilities and JD Sports Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and JD Sports
The main advantage of trading using opposite United Utilities and JD Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities position performs unexpectedly, JD Sports 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 JD Sports will offset losses from the drop in JD Sports' long position.| United Utilities vs. Herald Investment Trust | United Utilities vs. CVS Health Corp | United Utilities vs. Aurora Investment Trust | United Utilities vs. Inspiration Healthcare Group |
| JD Sports vs. Check Point Software | JD Sports vs. Microchip Technology | JD Sports vs. Roper Technologies | JD Sports vs. Raytheon Technologies 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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