Correlation Between United Utilities and Science Applications
Can any of the company-specific risk be diversified away by investing in both United Utilities and Science Applications 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 Science Applications 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 Science Applications International, you can compare the effects of market volatilities on United Utilities and Science Applications 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 Science Applications. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and Science Applications.
Diversification Opportunities for United Utilities and Science Applications
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between United and Science is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Science Applications Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Science Applications 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 Science Applications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Science Applications has no effect on the direction of United Utilities i.e., United Utilities and Science Applications go up and down completely randomly.
Pair Corralation between United Utilities and Science Applications
Assuming the 90 days trading horizon United Utilities Group is expected to generate 0.91 times more return on investment than Science Applications. However, United Utilities Group is 1.1 times less risky than Science Applications. It trades about 0.07 of its potential returns per unit of risk. Science Applications International is currently generating about 0.04 per unit of risk. If you would invest 1,171 in United Utilities Group on September 1, 2024 and sell it today you would earn a total of 179.00 from holding United Utilities Group or generate 15.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Utilities Group vs. Science Applications Internati
Performance |
| Timeline |
| United Utilities |
| Science Applications |
United Utilities and Science Applications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and Science Applications
The main advantage of trading using opposite United Utilities and Science Applications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities position performs unexpectedly, Science Applications 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 Science Applications will offset losses from the drop in Science Applications' long position.| United Utilities vs. Vastned Retail NV | United Utilities vs. RETAIL FOOD GROUP | United Utilities vs. Caseys General Stores | United Utilities vs. BURLINGTON STORES |
| Science Applications vs. Apple Inc | Science Applications vs. Apple Inc | Science Applications vs. Apple Inc | Science Applications vs. Apple Inc |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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