Correlation Between United Utilities and MT Bank

Can any of the company-specific risk be diversified away by investing in both United Utilities and MT Bank 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 MT Bank 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 MT Bank Corp, you can compare the effects of market volatilities on United Utilities and MT Bank 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 MT Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and MT Bank.

Diversification Opportunities for United Utilities and MT Bank

0.71

Correlation Coefficient

United Utilities  MT Bank

Poor diversification

The 3 months correlation between United and 0JW2 is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and MT Bank Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MT Bank Corp 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 MT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MT Bank Corp has no effect on the direction of United Utilities i.e., United Utilities and MT Bank go up and down completely randomly.

Pair Corralation between United Utilities and MT Bank

Assuming the 90 days trading horizon United Utilities Group is expected to generate 0.9 times more return on investment than MT Bank. However, United Utilities Group is 1.11 times less risky than MT Bank. It trades about 0.06 of its potential returns per unit of risk. MT Bank Corp is currently generating about -0.25 per unit of risk. If you would invest  106,848  in United Utilities Group on September 16, 2024 and sell it today you would earn a total of  1,352  from holding United Utilities Group or generate 1.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

United Utilities Group  vs.  MT Bank Corp

United Utilities

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United Utilities Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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.

MT Bank Corp

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with United Utilities and MT Bank

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

The idea behind United Utilities Group and MT Bank Corp 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.