Correlation Between United Utilities and Talanx AG
Can any of the company-specific risk be diversified away by investing in both United Utilities and Talanx AG 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 Talanx AG 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 Talanx AG, you can compare the effects of market volatilities on United Utilities and Talanx AG 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 Talanx AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and Talanx AG.
Diversification Opportunities for United Utilities and Talanx AG
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between United and Talanx is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Talanx AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talanx 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 Talanx AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talanx AG has no effect on the direction of United Utilities i.e., United Utilities and Talanx AG go up and down completely randomly.
Pair Corralation between United Utilities and Talanx AG
Assuming the 90 days trading horizon United Utilities is expected to generate 2.6 times less return on investment than Talanx AG. In addition to that, United Utilities is 1.2 times more volatile than Talanx AG. It trades about 0.04 of its total potential returns per unit of risk. Talanx AG is currently generating about 0.11 per unit of volatility. If you would invest 4,081 in Talanx AG on September 12, 2024 and sell it today you would earn a total of 4,319 from holding Talanx AG or generate 105.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Utilities Group vs. Talanx AG
Performance |
| Timeline |
| United Utilities |
| Talanx AG |
United Utilities and Talanx AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and Talanx AG
The main advantage of trading using opposite United Utilities and Talanx AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities position performs unexpectedly, Talanx AG 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 Talanx AG will offset losses from the drop in Talanx AG's long position.| United Utilities vs. Sunstone Hotel Investors | United Utilities vs. MIRAMAR HOTEL INV | United Utilities vs. MTI WIRELESS EDGE | United Utilities vs. Infrastrutture Wireless Italiane |
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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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