Correlation Between MOL Hungarian and United Utilities

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

By analyzing existing cross correlation between MOL Hungarian Oil and United Utilities Group, you can compare the effects of market volatilities on MOL Hungarian and United Utilities 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 MOL Hungarian with a short position of United Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of MOL Hungarian and United Utilities.

Diversification Opportunities for MOL Hungarian and United Utilities

0.02

Correlation Coefficient

MOL Hungarian  United Utilities

Significant diversification

The 3 months correlation between MOL and United is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding MOL Hungarian Oil and United Utilities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Utilities and MOL Hungarian 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 MOL Hungarian Oil are associated (or correlated) with United Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Utilities has no effect on the direction of MOL Hungarian i.e., MOL Hungarian and United Utilities go up and down completely randomly.

Pair Corralation between MOL Hungarian and United Utilities

Assuming the 90 days trading horizon MOL Hungarian Oil is expected to generate 1.06 times more return on investment than United Utilities. However, MOL Hungarian is 1.06 times more volatile than United Utilities Group. It trades about 0.02 of its potential returns per unit of risk. United Utilities Group is currently generating about 0.01 per unit of risk. If you would invest  270,455  in MOL Hungarian Oil on October 21, 2024 and sell it today you would earn a total of  21,745  from holding MOL Hungarian Oil or generate 8.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.59%
Values	Daily Returns

MOL Hungarian Oil  vs.  United Utilities Group

MOL Hungarian Oil

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MOL Hungarian Oil are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, MOL Hungarian is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

United Utilities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Utilities Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, United Utilities is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with MOL Hungarian and United Utilities

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

The idea behind MOL Hungarian Oil and United Utilities Group 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.