Correlation Between United Utilities and BORR DRILLING
Can any of the company-specific risk be diversified away by investing in both United Utilities and BORR DRILLING 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 BORR DRILLING 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 BORR DRILLING NEW, you can compare the effects of market volatilities on United Utilities and BORR DRILLING 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 BORR DRILLING. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and BORR DRILLING.
Diversification Opportunities for United Utilities and BORR DRILLING
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between United and BORR is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and BORR DRILLING NEW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BORR DRILLING NEW 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 BORR DRILLING. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BORR DRILLING NEW has no effect on the direction of United Utilities i.e., United Utilities and BORR DRILLING go up and down completely randomly.
Pair Corralation between United Utilities and BORR DRILLING
Assuming the 90 days trading horizon United Utilities is expected to generate 1.28 times less return on investment than BORR DRILLING. But when comparing it to its historical volatility, United Utilities Group is 1.88 times less risky than BORR DRILLING. It trades about 0.03 of its potential returns per unit of risk. BORR DRILLING NEW is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 344.00 in BORR DRILLING NEW on August 28, 2024 and sell it today you would earn a total of 43.00 from holding BORR DRILLING NEW or generate 12.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Utilities Group vs. BORR DRILLING NEW
Performance |
| Timeline |
| United Utilities |
| BORR DRILLING NEW |
United Utilities and BORR DRILLING Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and BORR DRILLING
The main advantage of trading using opposite United Utilities and BORR DRILLING positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities position performs unexpectedly, BORR DRILLING 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 BORR DRILLING will offset losses from the drop in BORR DRILLING's long position.| United Utilities vs. Insteel Industries | United Utilities vs. CosmoSteel Holdings Limited | United Utilities vs. Perma Fix Environmental Services | United Utilities vs. Hisense Home Appliances |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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