Correlation Between UNITED UTILITIES and Peninsula Energy
Can any of the company-specific risk be diversified away by investing in both UNITED UTILITIES and Peninsula Energy 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 Peninsula Energy 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 Peninsula Energy Limited, you can compare the effects of market volatilities on UNITED UTILITIES and Peninsula Energy 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 Peninsula Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of UNITED UTILITIES and Peninsula Energy.
Diversification Opportunities for UNITED UTILITIES and Peninsula Energy
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between UNITED and Peninsula is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding UNITED UTILITIES GR and Peninsula Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peninsula Energy 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 Peninsula Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peninsula Energy has no effect on the direction of UNITED UTILITIES i.e., UNITED UTILITIES and Peninsula Energy go up and down completely randomly.
Pair Corralation between UNITED UTILITIES and Peninsula Energy
Assuming the 90 days trading horizon UNITED UTILITIES GR is expected to generate 0.21 times more return on investment than Peninsula Energy. However, UNITED UTILITIES GR is 4.66 times less risky than Peninsula Energy. It trades about 0.02 of its potential returns per unit of risk. Peninsula Energy Limited is currently generating about 0.0 per unit of risk. If you would invest 1,152 in UNITED UTILITIES GR on November 8, 2024 and sell it today you would earn a total of 58.00 from holding UNITED UTILITIES GR or generate 5.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.2% |
| Values | Daily Returns |
UNITED UTILITIES GR vs. Peninsula Energy Limited
Performance |
| Timeline |
| UNITED UTILITIES |
| Peninsula Energy |
UNITED UTILITIES and Peninsula Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UNITED UTILITIES and Peninsula Energy
The main advantage of trading using opposite UNITED UTILITIES and Peninsula Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UNITED UTILITIES position performs unexpectedly, Peninsula Energy 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 Peninsula Energy will offset losses from the drop in Peninsula Energy's long position.| UNITED UTILITIES vs. HK Electric Investments | UNITED UTILITIES vs. Alliance Data Systems | UNITED UTILITIES vs. SEI INVESTMENTS | UNITED UTILITIES vs. Information Services International Dentsu |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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