Correlation Between United Utilities and Fortescue Metals
Can any of the company-specific risk be diversified away by investing in both United Utilities and Fortescue Metals 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 Fortescue Metals 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 Fortescue Metals Group, you can compare the effects of market volatilities on United Utilities and Fortescue Metals 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 Fortescue Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and Fortescue Metals.
Diversification Opportunities for United Utilities and Fortescue Metals
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between United and Fortescue is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Fortescue Metals Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortescue Metals 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 Fortescue Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortescue Metals has no effect on the direction of United Utilities i.e., United Utilities and Fortescue Metals go up and down completely randomly.
Pair Corralation between United Utilities and Fortescue Metals
Assuming the 90 days trading horizon United Utilities Group is expected to under-perform the Fortescue Metals. In addition to that, United Utilities is 1.3 times more volatile than Fortescue Metals Group. It trades about -0.2 of its total potential returns per unit of risk. Fortescue Metals Group is currently generating about 0.03 per unit of volatility. If you would invest 1,110 in Fortescue Metals Group on October 31, 2024 and sell it today you would earn a total of 10.00 from holding Fortescue Metals Group or generate 0.9% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
United Utilities Group vs. Fortescue Metals Group
Performance |
Timeline |
United Utilities |
Fortescue Metals |
United Utilities and Fortescue Metals Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with United Utilities and Fortescue Metals
The main advantage of trading using opposite United Utilities and Fortescue Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities position performs unexpectedly, Fortescue Metals 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 Fortescue Metals will offset losses from the drop in Fortescue Metals' long position.United Utilities vs. National Health Investors | United Utilities vs. Corsair Gaming | United Utilities vs. Planet Fitness | United Utilities vs. TEN SQUARE GAMES |
Fortescue Metals vs. GRUPO CARSO A1 | Fortescue Metals vs. Australian Agricultural | Fortescue Metals vs. Carsales | Fortescue Metals vs. DAIRY FARM INTL |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
Other Complementary Tools
Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance |