Correlation Between United Utilities and Toyota
Can any of the company-specific risk be diversified away by investing in both United Utilities and Toyota 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 Toyota 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 Toyota Motor, you can compare the effects of market volatilities on United Utilities and Toyota 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 Toyota. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and Toyota.
Diversification Opportunities for United Utilities and Toyota
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between United and Toyota is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Toyota Motor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyota Motor 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 Toyota. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toyota Motor has no effect on the direction of United Utilities i.e., United Utilities and Toyota go up and down completely randomly.
Pair Corralation between United Utilities and Toyota
Assuming the 90 days trading horizon United Utilities Group is expected to generate 0.96 times more return on investment than Toyota. However, United Utilities Group is 1.04 times less risky than Toyota. It trades about 0.03 of its potential returns per unit of risk. Toyota Motor is currently generating about 0.03 per unit of risk. If you would invest 1,103 in United Utilities Group on September 2, 2024 and sell it today you would earn a total of 247.00 from holding United Utilities Group or generate 22.39% 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. Toyota Motor
Performance |
| Timeline |
| United Utilities |
| Toyota Motor |
United Utilities and Toyota Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and Toyota
The main advantage of trading using opposite United Utilities and Toyota positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities position performs unexpectedly, Toyota 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 Toyota will offset losses from the drop in Toyota's long position.| United Utilities vs. Guangdong Investment Limited | United Utilities vs. Superior Plus Corp | United Utilities vs. NMI Holdings | United Utilities vs. Origin Agritech |
| Toyota vs. MCEWEN MINING INC | Toyota vs. BORR DRILLING NEW | Toyota vs. Games Workshop Group | Toyota vs. International Game Technology |
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 CEOs Directory module to screen CEOs from public companies around the world.
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