Correlation Between UNITED UTILITIES and GAMESTOP
Can any of the company-specific risk be diversified away by investing in both UNITED UTILITIES and GAMESTOP 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 GAMESTOP 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 GAMESTOP, you can compare the effects of market volatilities on UNITED UTILITIES and GAMESTOP 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 GAMESTOP. Check out your portfolio center. Please also check ongoing floating volatility patterns of UNITED UTILITIES and GAMESTOP.
Diversification Opportunities for UNITED UTILITIES and GAMESTOP
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between UNITED and GAMESTOP is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding UNITED UTILITIES GR and GAMESTOP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAMESTOP 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 GAMESTOP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAMESTOP has no effect on the direction of UNITED UTILITIES i.e., UNITED UTILITIES and GAMESTOP go up and down completely randomly.
Pair Corralation between UNITED UTILITIES and GAMESTOP
Assuming the 90 days trading horizon UNITED UTILITIES is expected to generate 2.33 times less return on investment than GAMESTOP. But when comparing it to its historical volatility, UNITED UTILITIES GR is 2.72 times less risky than GAMESTOP. It trades about 0.16 of its potential returns per unit of risk. GAMESTOP is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 2,499 in GAMESTOP on September 14, 2024 and sell it today you would earn a total of 245.00 from holding GAMESTOP or generate 9.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
UNITED UTILITIES GR vs. GAMESTOP
Performance |
| Timeline |
| UNITED UTILITIES |
| GAMESTOP |
UNITED UTILITIES and GAMESTOP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UNITED UTILITIES and GAMESTOP
The main advantage of trading using opposite UNITED UTILITIES and GAMESTOP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UNITED UTILITIES position performs unexpectedly, GAMESTOP 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 GAMESTOP will offset losses from the drop in GAMESTOP's long position.| UNITED UTILITIES vs. National Retail Properties | UNITED UTILITIES vs. QURATE RETAIL INC | UNITED UTILITIES vs. Sumitomo Rubber Industries | UNITED UTILITIES vs. GOODYEAR T RUBBER |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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