Correlation Between United Utilities and Rheinmetall
Can any of the company-specific risk be diversified away by investing in both United Utilities and Rheinmetall 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 Rheinmetall 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 Rheinmetall AG, you can compare the effects of market volatilities on United Utilities and Rheinmetall 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 Rheinmetall. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and Rheinmetall.
Diversification Opportunities for United Utilities and Rheinmetall
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between United and Rheinmetall is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Rheinmetall AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rheinmetall AG 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 Rheinmetall. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rheinmetall AG has no effect on the direction of United Utilities i.e., United Utilities and Rheinmetall go up and down completely randomly.
Pair Corralation between United Utilities and Rheinmetall
Assuming the 90 days trading horizon United Utilities is expected to generate 3.38 times less return on investment than Rheinmetall. But when comparing it to its historical volatility, United Utilities Group is 1.12 times less risky than Rheinmetall. It trades about 0.03 of its potential returns per unit of risk. Rheinmetall AG is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 52,996 in Rheinmetall AG on November 7, 2024 and sell it today you would earn a total of 22,924 from holding Rheinmetall AG or generate 43.26% 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. Rheinmetall AG
Performance |
| Timeline |
| United Utilities |
| Rheinmetall AG |
United Utilities and Rheinmetall Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and Rheinmetall
The main advantage of trading using opposite United Utilities and Rheinmetall positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities position performs unexpectedly, Rheinmetall 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 Rheinmetall will offset losses from the drop in Rheinmetall's long position.| United Utilities vs. Salesforce | United Utilities vs. ZhongAn Online P | United Utilities vs. New Residential Investment | United Utilities vs. Odyssean Investment Trust |
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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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