Correlation Between UNITED and Oatly Group

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

By analyzing existing cross correlation between UNITED TECHNOLOGIES P and Oatly Group AB, you can compare the effects of market volatilities on UNITED and Oatly Group 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 with a short position of Oatly Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of UNITED and Oatly Group.

Diversification Opportunities for UNITED and Oatly Group

0.6

Correlation Coefficient

UNITED  Oatly Group

Poor diversification

The 3 months correlation between UNITED and Oatly is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding UNITED TECHNOLOGIES P and Oatly Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oatly Group AB and UNITED 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 TECHNOLOGIES P are associated (or correlated) with Oatly Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oatly Group AB has no effect on the direction of UNITED i.e., UNITED and Oatly Group go up and down completely randomly.

Pair Corralation between UNITED and Oatly Group

Assuming the 90 days trading horizon UNITED TECHNOLOGIES P is expected to generate 0.26 times more return on investment than Oatly Group. However, UNITED TECHNOLOGIES P is 3.86 times less risky than Oatly Group. It trades about -0.01 of its potential returns per unit of risk. Oatly Group AB is currently generating about -0.03 per unit of risk. If you would invest  11,073  in UNITED TECHNOLOGIES P on October 11, 2024 and sell it today you would lose (576.00) from holding UNITED TECHNOLOGIES P or give up 5.2% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	46.57%
Values	Daily Returns

UNITED TECHNOLOGIES P  vs.  Oatly Group AB

UNITED TECHNOLOGIES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UNITED TECHNOLOGIES P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, UNITED is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Oatly Group AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oatly Group AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with UNITED and Oatly Group

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

The idea behind UNITED TECHNOLOGIES P and Oatly Group AB 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.