Correlation Between United Utilities and Sinopec Shanghai
Can any of the company-specific risk be diversified away by investing in both United Utilities and Sinopec Shanghai 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 Sinopec Shanghai 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 Sinopec Shanghai Petrochemical, you can compare the effects of market volatilities on United Utilities and Sinopec Shanghai 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 Sinopec Shanghai. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and Sinopec Shanghai.
Diversification Opportunities for United Utilities and Sinopec Shanghai
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between United and Sinopec is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Sinopec Shanghai Petrochemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sinopec Shanghai Pet 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 Sinopec Shanghai. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sinopec Shanghai Pet has no effect on the direction of United Utilities i.e., United Utilities and Sinopec Shanghai go up and down completely randomly.
Pair Corralation between United Utilities and Sinopec Shanghai
Assuming the 90 days trading horizon United Utilities is expected to generate 1.58 times less return on investment than Sinopec Shanghai. But when comparing it to its historical volatility, United Utilities Group is 4.27 times less risky than Sinopec Shanghai. It trades about 0.36 of its potential returns per unit of risk. Sinopec Shanghai Petrochemical is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 13.00 in Sinopec Shanghai Petrochemical on September 2, 2024 and sell it today you would earn a total of 2.00 from holding Sinopec Shanghai Petrochemical or generate 15.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Utilities Group vs. Sinopec Shanghai Petrochemical
Performance |
| Timeline |
| United Utilities |
| Sinopec Shanghai Pet |
United Utilities and Sinopec Shanghai Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and Sinopec Shanghai
The main advantage of trading using opposite United Utilities and Sinopec Shanghai positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities position performs unexpectedly, Sinopec Shanghai 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 Sinopec Shanghai will offset losses from the drop in Sinopec Shanghai'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 |
| Sinopec Shanghai vs. Singapore Telecommunications Limited | Sinopec Shanghai vs. ULTRA CLEAN HLDGS | Sinopec Shanghai vs. United Utilities Group | Sinopec Shanghai vs. CVW CLEANTECH INC |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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