Correlation Between United Utilities and Gelsenwasser
Can any of the company-specific risk be diversified away by investing in both United Utilities and Gelsenwasser 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 Gelsenwasser 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 Gelsenwasser AG, you can compare the effects of market volatilities on United Utilities and Gelsenwasser 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 Gelsenwasser. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and Gelsenwasser.
Diversification Opportunities for United Utilities and Gelsenwasser
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between United and Gelsenwasser is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Gelsenwasser AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gelsenwasser 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 Gelsenwasser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gelsenwasser AG has no effect on the direction of United Utilities i.e., United Utilities and Gelsenwasser go up and down completely randomly.
Pair Corralation between United Utilities and Gelsenwasser
Assuming the 90 days trading horizon United Utilities Group is expected to generate 0.55 times more return on investment than Gelsenwasser. However, United Utilities Group is 1.82 times less risky than Gelsenwasser. It trades about 0.03 of its potential returns per unit of risk. Gelsenwasser AG is currently generating about -0.02 per unit of risk. If you would invest 1,127 in United Utilities Group on August 26, 2024 and sell it today you would earn a total of 203.00 from holding United Utilities Group or generate 18.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Utilities Group vs. Gelsenwasser AG
Performance |
| Timeline |
| United Utilities |
| Gelsenwasser AG |
United Utilities and Gelsenwasser Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and Gelsenwasser
The main advantage of trading using opposite United Utilities and Gelsenwasser positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities position performs unexpectedly, Gelsenwasser 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 Gelsenwasser will offset losses from the drop in Gelsenwasser's long position.| United Utilities vs. VARIOUS EATERIES LS | United Utilities vs. Granite Construction | United Utilities vs. ETFS Coffee ETC | United Utilities vs. Nufarm Limited |
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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