Correlation Between United Utilities and Waste Management
Can any of the company-specific risk be diversified away by investing in both United Utilities and Waste Management 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 Waste Management 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 Waste Management, you can compare the effects of market volatilities on United Utilities and Waste Management 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 Waste Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and Waste Management.
Diversification Opportunities for United Utilities and Waste Management
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between United and Waste is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management 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 Waste Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Management has no effect on the direction of United Utilities i.e., United Utilities and Waste Management go up and down completely randomly.
Pair Corralation between United Utilities and Waste Management
Assuming the 90 days trading horizon United Utilities is expected to generate 1.74 times less return on investment than Waste Management. But when comparing it to its historical volatility, United Utilities Group is 1.03 times less risky than Waste Management. It trades about 0.21 of its potential returns per unit of risk. Waste Management is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 19,232 in Waste Management on August 29, 2024 and sell it today you would earn a total of 2,493 from holding Waste Management or generate 12.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Utilities Group vs. Waste Management
Performance |
| Timeline |
| United Utilities |
| Waste Management |
United Utilities and Waste Management Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and Waste Management
The main advantage of trading using opposite United Utilities and Waste Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities position performs unexpectedly, Waste Management 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 Waste Management will offset losses from the drop in Waste Management's long position.| United Utilities vs. Summit Hotel Properties | United Utilities vs. BANKINTER ADR 2007 | United Utilities vs. InterContinental Hotels Group | United Utilities vs. National Bank Holdings |
| Waste Management vs. Singapore Reinsurance | Waste Management vs. SEKISUI CHEMICAL | Waste Management vs. Universal Insurance Holdings | Waste Management vs. MYFAIR GOLD P |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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