Correlation Between UNITED UTILITIES and AOYAMA TRADING
Can any of the company-specific risk be diversified away by investing in both UNITED UTILITIES and AOYAMA TRADING 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 AOYAMA TRADING into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between UNITED UTILITIES GR and AOYAMA TRADING, you can compare the effects of market volatilities on UNITED UTILITIES and AOYAMA TRADING 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 AOYAMA TRADING. Check out your portfolio center. Please also check ongoing floating volatility patterns of UNITED UTILITIES and AOYAMA TRADING.
Diversification Opportunities for UNITED UTILITIES and AOYAMA TRADING
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between UNITED and AOYAMA is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding UNITED UTILITIES GR and AOYAMA TRADING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AOYAMA TRADING 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 GR are associated (or correlated) with AOYAMA TRADING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AOYAMA TRADING has no effect on the direction of UNITED UTILITIES i.e., UNITED UTILITIES and AOYAMA TRADING go up and down completely randomly.
Pair Corralation between UNITED UTILITIES and AOYAMA TRADING
Assuming the 90 days trading horizon UNITED UTILITIES is expected to generate 11.25 times less return on investment than AOYAMA TRADING. But when comparing it to its historical volatility, UNITED UTILITIES GR is 4.02 times less risky than AOYAMA TRADING. It trades about 0.03 of its potential returns per unit of risk. AOYAMA TRADING is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 506.00 in AOYAMA TRADING on September 4, 2024 and sell it today you would earn a total of 904.00 from holding AOYAMA TRADING or generate 178.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
UNITED UTILITIES GR vs. AOYAMA TRADING
Performance |
| Timeline |
| UNITED UTILITIES |
| AOYAMA TRADING |
UNITED UTILITIES and AOYAMA TRADING Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UNITED UTILITIES and AOYAMA TRADING
The main advantage of trading using opposite UNITED UTILITIES and AOYAMA TRADING positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UNITED UTILITIES position performs unexpectedly, AOYAMA TRADING 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 AOYAMA TRADING will offset losses from the drop in AOYAMA TRADING's long position.| UNITED UTILITIES vs. TOTAL GABON | UNITED UTILITIES vs. Walgreens Boots Alliance | UNITED UTILITIES vs. Peak Resources Limited |
| AOYAMA TRADING vs. COLUMBIA SPORTSWEAR | AOYAMA TRADING vs. DICKS Sporting Goods | AOYAMA TRADING vs. PennantPark Investment | AOYAMA TRADING vs. Big 5 Sporting |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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