Correlation Between United Utilities and Molson Coors
Can any of the company-specific risk be diversified away by investing in both United Utilities and Molson Coors 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 Molson Coors 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 Molson Coors Beverage, you can compare the effects of market volatilities on United Utilities and Molson Coors 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 Molson Coors. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and Molson Coors.
Diversification Opportunities for United Utilities and Molson Coors
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and Molson is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Molson Coors Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molson Coors Beverage 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 Molson Coors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Molson Coors Beverage has no effect on the direction of United Utilities i.e., United Utilities and Molson Coors go up and down completely randomly.
Pair Corralation between United Utilities and Molson Coors
Assuming the 90 days trading horizon United Utilities Group is expected to under-perform the Molson Coors. In addition to that, United Utilities is 1.24 times more volatile than Molson Coors Beverage. It trades about -0.31 of its total potential returns per unit of risk. Molson Coors Beverage is currently generating about -0.04 per unit of volatility. If you would invest 5,716 in Molson Coors Beverage on September 26, 2024 and sell it today you would lose (44.00) from holding Molson Coors Beverage or give up 0.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Utilities Group vs. Molson Coors Beverage
Performance |
| Timeline |
| United Utilities |
| Molson Coors Beverage |
United Utilities and Molson Coors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and Molson Coors
The main advantage of trading using opposite United Utilities and Molson Coors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities position performs unexpectedly, Molson Coors 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 Molson Coors will offset losses from the drop in Molson Coors' long position.| United Utilities vs. American Water Works | United Utilities vs. Aqua America | United Utilities vs. Companhia de Saneamento | United Utilities vs. Guangdong Investment Limited |
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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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