Correlation Between United Utilities and KeyCorp
Can any of the company-specific risk be diversified away by investing in both United Utilities and KeyCorp 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 KeyCorp 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 KeyCorp, you can compare the effects of market volatilities on United Utilities and KeyCorp 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 KeyCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and KeyCorp.
Diversification Opportunities for United Utilities and KeyCorp
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and KeyCorp is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp 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 KeyCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KeyCorp has no effect on the direction of United Utilities i.e., United Utilities and KeyCorp go up and down completely randomly.
Pair Corralation between United Utilities and KeyCorp
Assuming the 90 days trading horizon United Utilities is expected to generate 3.69 times less return on investment than KeyCorp. But when comparing it to its historical volatility, United Utilities Group is 1.4 times less risky than KeyCorp. It trades about 0.04 of its potential returns per unit of risk. KeyCorp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 883.00 in KeyCorp on September 2, 2024 and sell it today you would earn a total of 952.00 from holding KeyCorp or generate 107.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Utilities Group vs. KeyCorp
Performance |
| Timeline |
| United Utilities |
| KeyCorp |
United Utilities and KeyCorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and KeyCorp
The main advantage of trading using opposite United Utilities and KeyCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities position performs unexpectedly, KeyCorp 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 KeyCorp will offset losses from the drop in KeyCorp'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 |
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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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