Correlation Between UNITED UTILITIES and Air Transport
Can any of the company-specific risk be diversified away by investing in both UNITED UTILITIES and Air Transport 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 Air Transport 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 Air Transport Services, you can compare the effects of market volatilities on UNITED UTILITIES and Air Transport 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 Air Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of UNITED UTILITIES and Air Transport.
Diversification Opportunities for UNITED UTILITIES and Air Transport
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between UNITED and Air is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding UNITED UTILITIES GR and Air Transport Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Transport Services 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 Air Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Transport Services has no effect on the direction of UNITED UTILITIES i.e., UNITED UTILITIES and Air Transport go up and down completely randomly.
Pair Corralation between UNITED UTILITIES and Air Transport
Assuming the 90 days trading horizon UNITED UTILITIES GR is expected to under-perform the Air Transport. But the stock apears to be less risky and, when comparing its historical volatility, UNITED UTILITIES GR is 2.18 times less risky than Air Transport. The stock trades about -0.08 of its potential returns per unit of risk. The Air Transport Services is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 1,490 in Air Transport Services on October 22, 2024 and sell it today you would earn a total of 650.00 from holding Air Transport Services or generate 43.62% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
UNITED UTILITIES GR vs. Air Transport Services
Performance |
Timeline |
UNITED UTILITIES |
Air Transport Services |
UNITED UTILITIES and Air Transport Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with UNITED UTILITIES and Air Transport
The main advantage of trading using opposite UNITED UTILITIES and Air Transport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UNITED UTILITIES position performs unexpectedly, Air Transport 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 Air Transport will offset losses from the drop in Air Transport's long position.UNITED UTILITIES vs. HomeToGo SE | UNITED UTILITIES vs. Motorcar Parts of | UNITED UTILITIES vs. Focus Home Interactive | UNITED UTILITIES vs. INVITATION HOMES DL |
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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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