Correlation Between United Utilities and One Media

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

Diversification Opportunities for United Utilities and One Media

-0.34

Correlation Coefficient

United Utilities  One Media

Very good diversification

The 3 months correlation between United and One is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and One Media iP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on One Media iP 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 One Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of One Media iP has no effect on the direction of United Utilities i.e., United Utilities and One Media go up and down completely randomly.

Pair Corralation between United Utilities and One Media

Assuming the 90 days trading horizon United Utilities is expected to generate 1.4 times less return on investment than One Media. But when comparing it to its historical volatility, United Utilities Group is 2.33 times less risky than One Media. It trades about 0.3 of its potential returns per unit of risk. One Media iP is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  375.00  in One Media iP on August 31, 2024 and sell it today you would earn a total of  50.00  from holding One Media iP or generate 13.33% return on investment over 90 days.

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

United Utilities Group  vs.  One Media iP

United Utilities

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in United Utilities Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, United Utilities may actually be approaching a critical reversion point that can send shares even higher in December 2024.

One Media iP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days One Media iP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, One Media is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with United Utilities and One Media

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

The idea behind United Utilities Group and One Media iP 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.