Correlation Between United Utilities and Lindsell Train
Can any of the company-specific risk be diversified away by investing in both United Utilities and Lindsell Train 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 Lindsell Train 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 Lindsell Train Investment, you can compare the effects of market volatilities on United Utilities and Lindsell Train 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 Lindsell Train. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and Lindsell Train.
Diversification Opportunities for United Utilities and Lindsell Train
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between United and Lindsell is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Lindsell Train Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lindsell Train Investment 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 Lindsell Train. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lindsell Train Investment has no effect on the direction of United Utilities i.e., United Utilities and Lindsell Train go up and down completely randomly.
Pair Corralation between United Utilities and Lindsell Train
Assuming the 90 days trading horizon United Utilities Group is expected to generate 0.93 times more return on investment than Lindsell Train. However, United Utilities Group is 1.07 times less risky than Lindsell Train. It trades about 0.03 of its potential returns per unit of risk. Lindsell Train Investment is currently generating about -0.05 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 | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Utilities Group vs. Lindsell Train Investment
Performance |
| Timeline |
| United Utilities |
| Lindsell Train Investment |
United Utilities and Lindsell Train Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and Lindsell Train
The main advantage of trading using opposite United Utilities and Lindsell Train positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities position performs unexpectedly, Lindsell Train 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 Lindsell Train will offset losses from the drop in Lindsell Train's long position.| United Utilities vs. MyHealthChecked Plc | United Utilities vs. PureTech Health plc | United Utilities vs. Abingdon Health Plc | United Utilities vs. Home Depot |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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