Correlation Between United Utilities and G8 EDUCATION
Can any of the company-specific risk be diversified away by investing in both United Utilities and G8 EDUCATION 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 G8 EDUCATION 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 G8 EDUCATION, you can compare the effects of market volatilities on United Utilities and G8 EDUCATION 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 G8 EDUCATION. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and G8 EDUCATION.
Diversification Opportunities for United Utilities and G8 EDUCATION
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between United and 3EAG is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and G8 EDUCATION in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G8 EDUCATION 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 G8 EDUCATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G8 EDUCATION has no effect on the direction of United Utilities i.e., United Utilities and G8 EDUCATION go up and down completely randomly.
Pair Corralation between United Utilities and G8 EDUCATION
Assuming the 90 days trading horizon United Utilities is expected to generate 1.55 times less return on investment than G8 EDUCATION. But when comparing it to its historical volatility, United Utilities Group is 1.07 times less risky than G8 EDUCATION. It trades about 0.05 of its potential returns per unit of risk. G8 EDUCATION is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 64.00 in G8 EDUCATION on September 3, 2024 and sell it today you would earn a total of 18.00 from holding G8 EDUCATION or generate 28.13% 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. G8 EDUCATION
Performance |
| Timeline |
| United Utilities |
| G8 EDUCATION |
United Utilities and G8 EDUCATION Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and G8 EDUCATION
The main advantage of trading using opposite United Utilities and G8 EDUCATION positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities position performs unexpectedly, G8 EDUCATION 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 G8 EDUCATION will offset losses from the drop in G8 EDUCATION's long position.| United Utilities vs. Guangdong Investment Limited | United Utilities vs. Superior Plus Corp | United Utilities vs. NMI Holdings | United Utilities vs. Origin Agritech |
| G8 EDUCATION vs. Computershare Limited | G8 EDUCATION vs. INTERSHOP Communications Aktiengesellschaft | G8 EDUCATION vs. ATRESMEDIA | G8 EDUCATION vs. SCANSOURCE |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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