Correlation Between De Grey and United Utilities

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

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

Diversification Opportunities for De Grey and United Utilities

0.65

Correlation Coefficient

De Grey  United Utilities

Poor diversification

The 3 months correlation between DGD and United is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding De Grey Mining and United Utilities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Utilities and De Grey 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 De Grey Mining 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 De Grey i.e., De Grey and United Utilities go up and down completely randomly.

Pair Corralation between De Grey and United Utilities

Assuming the 90 days trading horizon De Grey Mining is expected to generate 2.4 times more return on investment than United Utilities. However, De Grey is 2.4 times more volatile than United Utilities Group. It trades about -0.13 of its potential returns per unit of risk. United Utilities Group is currently generating about -0.4 per unit of risk. If you would invest  115.00  in De Grey Mining on October 10, 2024 and sell it today you would lose (6.00) from holding De Grey Mining or give up 5.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

De Grey Mining  vs.  United Utilities Group

De Grey Mining

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in De Grey Mining are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, De Grey unveiled solid returns over the last few months and may actually be approaching a breakup point.

United Utilities

Risk-Adjusted Performance

3 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Utilities Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, United Utilities is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with De Grey and United Utilities

The main advantage of trading using opposite De Grey and United Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if De Grey 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 De Grey Mining 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..