Correlation Between United Utilities and Guangdong Investment
Can any of the company-specific risk be diversified away by investing in both United Utilities and Guangdong Investment 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 Guangdong Investment 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 Guangdong Investment Limited, you can compare the effects of market volatilities on United Utilities and Guangdong Investment 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 Guangdong Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and Guangdong Investment.
Diversification Opportunities for United Utilities and Guangdong Investment
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between United and Guangdong is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Guangdong Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Investment 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 Guangdong Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Investment has no effect on the direction of United Utilities i.e., United Utilities and Guangdong Investment go up and down completely randomly.
Pair Corralation between United Utilities and Guangdong Investment
Assuming the 90 days trading horizon United Utilities Group is expected to generate 0.7 times more return on investment than Guangdong Investment. However, United Utilities Group is 1.42 times less risky than Guangdong Investment. It trades about 0.33 of its potential returns per unit of risk. Guangdong Investment Limited is currently generating about 0.12 per unit of risk. If you would invest 1,214 in United Utilities Group on September 1, 2024 and sell it today you would earn a total of 136.00 from holding United Utilities Group or generate 11.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Utilities Group vs. Guangdong Investment Limited
Performance |
| Timeline |
| United Utilities |
| Guangdong Investment |
United Utilities and Guangdong Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and Guangdong Investment
The main advantage of trading using opposite United Utilities and Guangdong Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities position performs unexpectedly, Guangdong Investment 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 Guangdong Investment will offset losses from the drop in Guangdong Investment's 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 |
| Guangdong Investment vs. United Utilities Group | Guangdong Investment vs. Superior Plus Corp | Guangdong Investment vs. NMI Holdings | Guangdong Investment vs. Origin Agritech |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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