Correlation Between United Utilities and Global Water
Can any of the company-specific risk be diversified away by investing in both United Utilities and Global Water 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 Global Water 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 Global Water Resources, you can compare the effects of market volatilities on United Utilities and Global Water 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 Global Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and Global Water.
Diversification Opportunities for United Utilities and Global Water
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between United and Global is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Global Water Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Water Resources 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 Global Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Water Resources has no effect on the direction of United Utilities i.e., United Utilities and Global Water go up and down completely randomly.
Pair Corralation between United Utilities and Global Water
Assuming the 90 days horizon United Utilities Group is expected to generate 0.84 times more return on investment than Global Water. However, United Utilities Group is 1.19 times less risky than Global Water. It trades about 0.09 of its potential returns per unit of risk. Global Water Resources is currently generating about 0.05 per unit of risk. If you would invest 1,286 in United Utilities Group on August 28, 2024 and sell it today you would earn a total of 108.00 from holding United Utilities Group or generate 8.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Utilities Group vs. Global Water Resources
Performance |
| Timeline |
| United Utilities |
| Global Water Resources |
United Utilities and Global Water Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and Global Water
The main advantage of trading using opposite United Utilities and Global Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities position performs unexpectedly, Global Water 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 Global Water will offset losses from the drop in Global Water's long position.| United Utilities vs. Artesian Resources | United Utilities vs. Global Water Resources | United Utilities vs. Essential Utilities | United Utilities vs. American Water Works |
| Global Water vs. Cadiz Inc | Global Water vs. Artesian Resources | Global Water vs. Parke Bancorp | Global Water vs. Peoples Bancorp of |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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