Correlation Between UNITED UTILITIES and DAIRY FARM
Can any of the company-specific risk be diversified away by investing in both UNITED UTILITIES and DAIRY FARM 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 DAIRY FARM 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 DAIRY FARM INTL, you can compare the effects of market volatilities on UNITED UTILITIES and DAIRY FARM 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 DAIRY FARM. Check out your portfolio center. Please also check ongoing floating volatility patterns of UNITED UTILITIES and DAIRY FARM.
Diversification Opportunities for UNITED UTILITIES and DAIRY FARM
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between UNITED and DAIRY is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding UNITED UTILITIES GR and DAIRY FARM INTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAIRY FARM INTL 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 DAIRY FARM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DAIRY FARM INTL has no effect on the direction of UNITED UTILITIES i.e., UNITED UTILITIES and DAIRY FARM go up and down completely randomly.
Pair Corralation between UNITED UTILITIES and DAIRY FARM
Assuming the 90 days trading horizon UNITED UTILITIES GR is expected to generate 0.67 times more return on investment than DAIRY FARM. However, UNITED UTILITIES GR is 1.5 times less risky than DAIRY FARM. It trades about 0.01 of its potential returns per unit of risk. DAIRY FARM INTL is currently generating about -0.01 per unit of risk. If you would invest 1,108 in UNITED UTILITIES GR on October 11, 2024 and sell it today you would earn a total of 42.00 from holding UNITED UTILITIES GR or generate 3.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
UNITED UTILITIES GR vs. DAIRY FARM INTL
Performance |
| Timeline |
| UNITED UTILITIES |
| DAIRY FARM INTL |
UNITED UTILITIES and DAIRY FARM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UNITED UTILITIES and DAIRY FARM
The main advantage of trading using opposite UNITED UTILITIES and DAIRY FARM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UNITED UTILITIES position performs unexpectedly, DAIRY FARM 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 DAIRY FARM will offset losses from the drop in DAIRY FARM's long position.| UNITED UTILITIES vs. Broadwind | UNITED UTILITIES vs. QUEEN S ROAD | UNITED UTILITIES vs. Broadridge Financial Solutions | UNITED UTILITIES vs. SAFEROADS HLDGS |
| DAIRY FARM vs. NORTHEAST UTILITIES | DAIRY FARM vs. Canadian Utilities Limited | DAIRY FARM vs. UNITED UTILITIES GR | DAIRY FARM vs. VIENNA INSURANCE GR |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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