Correlation Between United Internet and Gfinity PLC

Can any of the company-specific risk be diversified away by investing in both United Internet and Gfinity PLC 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 Internet and Gfinity PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between United Internet AG and Gfinity PLC, you can compare the effects of market volatilities on United Internet and Gfinity PLC 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 Internet with a short position of Gfinity PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Internet and Gfinity PLC.

Diversification Opportunities for United Internet and Gfinity PLC

0.39

Correlation Coefficient

United Internet  Gfinity PLC

Weak diversification

The 3 months correlation between United and Gfinity is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding United Internet AG and Gfinity PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gfinity PLC and United Internet 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 Internet AG are associated (or correlated) with Gfinity PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gfinity PLC has no effect on the direction of United Internet i.e., United Internet and Gfinity PLC go up and down completely randomly.

Pair Corralation between United Internet and Gfinity PLC

Assuming the 90 days trading horizon United Internet is expected to generate 4.35 times less return on investment than Gfinity PLC. But when comparing it to its historical volatility, United Internet AG is 7.81 times less risky than Gfinity PLC. It trades about 0.18 of its potential returns per unit of risk. Gfinity PLC is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  5.50  in Gfinity PLC on December 24, 2024 and sell it today you would earn a total of  2.25  from holding Gfinity PLC or generate 40.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	88.89%
Values	Daily Returns

United Internet AG  vs.  Gfinity PLC

United Internet AG

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Internet AG are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, United Internet unveiled solid returns over the last few months and may actually be approaching a breakup point.

Gfinity PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gfinity PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Gfinity PLC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Internet and Gfinity PLC

The main advantage of trading using opposite United Internet and Gfinity PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Internet position performs unexpectedly, Gfinity PLC 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 Gfinity PLC will offset losses from the drop in Gfinity PLC's long position.

The idea behind United Internet AG and Gfinity PLC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.