Correlation Between United Utilities and Swatch Group
Can any of the company-specific risk be diversified away by investing in both United Utilities and Swatch Group 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 Swatch Group 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 The Swatch Group, you can compare the effects of market volatilities on United Utilities and Swatch Group 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 Swatch Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and Swatch Group.
Diversification Opportunities for United Utilities and Swatch Group
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between United and Swatch is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and The Swatch Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swatch Group 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 Swatch Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swatch Group has no effect on the direction of United Utilities i.e., United Utilities and Swatch Group go up and down completely randomly.
Pair Corralation between United Utilities and Swatch Group
Assuming the 90 days trading horizon United Utilities Group is expected to under-perform the Swatch Group. But the stock apears to be less risky and, when comparing its historical volatility, United Utilities Group is 1.6 times less risky than Swatch Group. The stock trades about -0.08 of its potential returns per unit of risk. The The Swatch Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 810.00 in The Swatch Group on November 6, 2024 and sell it today you would earn a total of 60.00 from holding The Swatch Group or generate 7.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
United Utilities Group vs. The Swatch Group
Performance |
| Timeline |
| United Utilities |
| Swatch Group |
United Utilities and Swatch Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and Swatch Group
The main advantage of trading using opposite United Utilities and Swatch Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities position performs unexpectedly, Swatch Group 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 Swatch Group will offset losses from the drop in Swatch Group'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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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