Correlation Between United Utilities and Universal Entertainment
Can any of the company-specific risk be diversified away by investing in both United Utilities and Universal Entertainment 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 Universal Entertainment 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 Universal Entertainment, you can compare the effects of market volatilities on United Utilities and Universal Entertainment 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 Universal Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and Universal Entertainment.
Diversification Opportunities for United Utilities and Universal Entertainment
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between United and Universal is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Universal Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Entertainment 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 Universal Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Entertainment has no effect on the direction of United Utilities i.e., United Utilities and Universal Entertainment go up and down completely randomly.
Pair Corralation between United Utilities and Universal Entertainment
Assuming the 90 days trading horizon United Utilities Group is expected to generate 0.29 times more return on investment than Universal Entertainment. However, United Utilities Group is 3.49 times less risky than Universal Entertainment. It trades about 0.3 of its potential returns per unit of risk. Universal Entertainment is currently generating about -0.11 per unit of risk. If you would invest 1,214 in United Utilities Group on September 4, 2024 and sell it today you would earn a total of 126.00 from holding United Utilities Group or generate 10.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
United Utilities Group vs. Universal Entertainment
Performance |
| Timeline |
| United Utilities |
| Universal Entertainment |
United Utilities and Universal Entertainment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and Universal Entertainment
The main advantage of trading using opposite United Utilities and Universal Entertainment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities position performs unexpectedly, Universal Entertainment 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 Universal Entertainment will offset losses from the drop in Universal Entertainment's long position.| United Utilities vs. Superior Plus Corp | United Utilities vs. NMI Holdings | United Utilities vs. Origin Agritech | United Utilities vs. SIVERS SEMICONDUCTORS AB |
| Universal Entertainment vs. TOTAL GABON | Universal Entertainment vs. Walgreens Boots Alliance | Universal Entertainment vs. Peak Resources Limited |
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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