Correlation Between UNITED UTILITIES and Carsales
Can any of the company-specific risk be diversified away by investing in both UNITED UTILITIES and Carsales 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 Carsales 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 CarsalesCom, you can compare the effects of market volatilities on UNITED UTILITIES and Carsales 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 Carsales. Check out your portfolio center. Please also check ongoing floating volatility patterns of UNITED UTILITIES and Carsales.
Diversification Opportunities for UNITED UTILITIES and Carsales
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between UNITED and Carsales is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding UNITED UTILITIES GR and CarsalesCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom 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 Carsales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom has no effect on the direction of UNITED UTILITIES i.e., UNITED UTILITIES and Carsales go up and down completely randomly.
Pair Corralation between UNITED UTILITIES and Carsales
Assuming the 90 days trading horizon UNITED UTILITIES is expected to generate 1.45 times less return on investment than Carsales. In addition to that, UNITED UTILITIES is 1.13 times more volatile than CarsalesCom. It trades about 0.22 of its total potential returns per unit of risk. CarsalesCom is currently generating about 0.37 per unit of volatility. If you would invest 2,240 in CarsalesCom on August 28, 2024 and sell it today you would earn a total of 240.00 from holding CarsalesCom or generate 10.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
UNITED UTILITIES GR vs. CarsalesCom
Performance |
| Timeline |
| UNITED UTILITIES |
| CarsalesCom |
UNITED UTILITIES and Carsales Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UNITED UTILITIES and Carsales
The main advantage of trading using opposite UNITED UTILITIES and Carsales positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UNITED UTILITIES position performs unexpectedly, Carsales 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 Carsales will offset losses from the drop in Carsales' long position.| UNITED UTILITIES vs. JD SPORTS FASH | UNITED UTILITIES vs. Federal Agricultural Mortgage | UNITED UTILITIES vs. Granite Construction | UNITED UTILITIES vs. USWE SPORTS AB |
| Carsales vs. Grupo Carso SAB | Carsales vs. COMMERCIAL VEHICLE | Carsales vs. ITALIAN WINE BRANDS | Carsales vs. BLUESCOPE STEEL |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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