Correlation Between UNITED UTILITIES and Chevron

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

Diversification Opportunities for UNITED UTILITIES and Chevron

0.77

Correlation Coefficient

UNITED UTILITIES  Chevron

Poor diversification

The 3 months correlation between UNITED and Chevron is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding UNITED UTILITIES GR and Chevron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron 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 Chevron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron has no effect on the direction of UNITED UTILITIES i.e., UNITED UTILITIES and Chevron go up and down completely randomly.

Pair Corralation between UNITED UTILITIES and Chevron

Assuming the 90 days trading horizon UNITED UTILITIES GR is expected to generate 0.98 times more return on investment than Chevron. However, UNITED UTILITIES GR is 1.02 times less risky than Chevron. It trades about 0.07 of its potential returns per unit of risk. Chevron is currently generating about 0.07 per unit of risk. If you would invest  1,185  in UNITED UTILITIES GR on October 7, 2024 and sell it today you would earn a total of  65.00  from holding UNITED UTILITIES GR or generate 5.49% return on investment over 90 days.

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

UNITED UTILITIES GR  vs.  Chevron

UNITED UTILITIES

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in UNITED UTILITIES GR are ranked lower than 5 (%) 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.

Chevron

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Chevron is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with UNITED UTILITIES and Chevron

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

The idea behind UNITED UTILITIES GR and Chevron 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.