Correlation Between United Utilities and ALD SA
Can any of the company-specific risk be diversified away by investing in both United Utilities and ALD SA 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 ALD SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Utilities Group and ALD SA, you can compare the effects of market volatilities on United Utilities and ALD SA 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 ALD SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and ALD SA.
Diversification Opportunities for United Utilities and ALD SA
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between United and ALD is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and ALD SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALD SA 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 Group are associated (or correlated) with ALD SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALD SA has no effect on the direction of United Utilities i.e., United Utilities and ALD SA go up and down completely randomly.
Pair Corralation between United Utilities and ALD SA
Assuming the 90 days trading horizon United Utilities Group is expected to generate 0.54 times more return on investment than ALD SA. However, United Utilities Group is 1.86 times less risky than ALD SA. It trades about 0.03 of its potential returns per unit of risk. ALD SA is currently generating about 0.01 per unit of risk. If you would invest 1,222 in United Utilities Group on September 4, 2024 and sell it today you would earn a total of 118.00 from holding United Utilities Group or generate 9.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Utilities Group vs. ALD SA
Performance |
| Timeline |
| United Utilities |
| ALD SA |
United Utilities and ALD SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and ALD SA
The main advantage of trading using opposite United Utilities and ALD SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities position performs unexpectedly, ALD SA 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 ALD SA will offset losses from the drop in ALD SA's long position.| United Utilities vs. Superior Plus Corp | United Utilities vs. NMI Holdings | United Utilities vs. Origin Agritech | United Utilities vs. SIVERS SEMICONDUCTORS AB |
| ALD SA vs. CHIBA BANK | ALD SA vs. COMINTL BANK ADR1 | ALD SA vs. Commonwealth Bank of | ALD SA vs. VIRG NATL BANKSH |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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