Correlation Between United Utilities and Retail Estates
Can any of the company-specific risk be diversified away by investing in both United Utilities and Retail Estates 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 Retail Estates 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 Retail Estates NV, you can compare the effects of market volatilities on United Utilities and Retail Estates 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 Retail Estates. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and Retail Estates.
Diversification Opportunities for United Utilities and Retail Estates
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between United and Retail is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Retail Estates NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Retail Estates NV 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 Retail Estates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Retail Estates NV has no effect on the direction of United Utilities i.e., United Utilities and Retail Estates go up and down completely randomly.
Pair Corralation between United Utilities and Retail Estates
Assuming the 90 days trading horizon United Utilities Group is expected to generate 1.35 times more return on investment than Retail Estates. However, United Utilities is 1.35 times more volatile than Retail Estates NV. It trades about 0.25 of its potential returns per unit of risk. Retail Estates NV is currently generating about -0.32 per unit of risk. If you would invest 1,260 in United Utilities Group on August 27, 2024 and sell it today you would earn a total of 100.00 from holding United Utilities Group or generate 7.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Utilities Group vs. Retail Estates NV
Performance |
| Timeline |
| United Utilities |
| Retail Estates NV |
United Utilities and Retail Estates Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and Retail Estates
The main advantage of trading using opposite United Utilities and Retail Estates positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities position performs unexpectedly, Retail Estates 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 Retail Estates will offset losses from the drop in Retail Estates' 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 |
| Retail Estates vs. TRADEGATE | Retail Estates vs. UNITED UTILITIES GR | Retail Estates vs. United Utilities Group | Retail Estates vs. SIDETRADE EO 1 |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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