Correlation Between UNITED UTILITIES and Ecotel Communication

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

Diversification Opportunities for UNITED UTILITIES and Ecotel Communication

0.33

Correlation Coefficient

UNITED UTILITIES  Ecotel Communication

Weak diversification

The 3 months correlation between UNITED and Ecotel is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding UNITED UTILITIES GR and ecotel communication ag in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ecotel communication 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 Ecotel Communication. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ecotel communication has no effect on the direction of UNITED UTILITIES i.e., UNITED UTILITIES and Ecotel Communication go up and down completely randomly.

Pair Corralation between UNITED UTILITIES and Ecotel Communication

Assuming the 90 days trading horizon UNITED UTILITIES GR is expected to under-perform the Ecotel Communication. But the stock apears to be less risky and, when comparing its historical volatility, UNITED UTILITIES GR is 1.39 times less risky than Ecotel Communication. The stock trades about -0.49 of its potential returns per unit of risk. The ecotel communication ag is currently generating about -0.35 of returns per unit of risk over similar time horizon. If you would invest  1,410  in ecotel communication ag on October 10, 2024 and sell it today you would lose (85.00) from holding ecotel communication ag or give up 6.03% of portfolio value over 90 days.

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

UNITED UTILITIES GR  vs.  ecotel communication ag

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

ecotel communication

Risk-Adjusted Performance

4 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ecotel communication ag are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, Ecotel Communication 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 Ecotel Communication

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

The idea behind UNITED UTILITIES GR and ecotel communication ag 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.