Correlation Between UNITED UTILITIES and National Storage

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

By analyzing existing cross correlation between UNITED UTILITIES GR and National Storage Affiliates, you can compare the effects of market volatilities on UNITED UTILITIES and National Storage 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 National Storage. Check out your portfolio center. Please also check ongoing floating volatility patterns of UNITED UTILITIES and National Storage.

Diversification Opportunities for UNITED UTILITIES and National Storage

0.2

Correlation Coefficient

UNITED UTILITIES  National Storage

Modest diversification

The 3 months correlation between UNITED and National is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding UNITED UTILITIES GR and National Storage Affiliates in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Storage Aff 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 GR are associated (or correlated) with National Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Storage Aff has no effect on the direction of UNITED UTILITIES i.e., UNITED UTILITIES and National Storage go up and down completely randomly.

Pair Corralation between UNITED UTILITIES and National Storage

Assuming the 90 days trading horizon UNITED UTILITIES GR is expected to generate 1.07 times more return on investment than National Storage. However, UNITED UTILITIES is 1.07 times more volatile than National Storage Affiliates. It trades about 0.03 of its potential returns per unit of risk. National Storage Affiliates is currently generating about -0.04 per unit of risk. If you would invest  1,283  in UNITED UTILITIES GR on September 17, 2024 and sell it today you would earn a total of  7.00  from holding UNITED UTILITIES GR or generate 0.55% return on investment over 90 days.

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

UNITED UTILITIES GR  vs.  National Storage Affiliates

UNITED UTILITIES

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in UNITED UTILITIES GR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, UNITED UTILITIES is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

National Storage Aff

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Storage Affiliates has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with UNITED UTILITIES and National Storage

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

The idea behind UNITED UTILITIES GR and National Storage Affiliates 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.