Correlation Between UNITED UTILITIES and Hapag-Lloyd

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

Diversification Opportunities for UNITED UTILITIES and Hapag-Lloyd

0.19

Correlation Coefficient

UNITED UTILITIES  Hapag-Lloyd

Average diversification

The 3 months correlation between UNITED and Hapag-Lloyd is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding UNITED UTILITIES GR and Hapag Lloyd AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hapag Lloyd AG 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 Hapag-Lloyd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hapag Lloyd AG has no effect on the direction of UNITED UTILITIES i.e., UNITED UTILITIES and Hapag-Lloyd go up and down completely randomly.

Pair Corralation between UNITED UTILITIES and Hapag-Lloyd

Assuming the 90 days trading horizon UNITED UTILITIES GR is expected to generate 0.66 times more return on investment than Hapag-Lloyd. However, UNITED UTILITIES GR is 1.51 times less risky than Hapag-Lloyd. It trades about -0.08 of its potential returns per unit of risk. Hapag Lloyd AG is currently generating about -0.06 per unit of risk. If you would invest  1,250  in UNITED UTILITIES GR on December 25, 2024 and sell it today you would lose (100.00) from holding UNITED UTILITIES GR or give up 8.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

UNITED UTILITIES GR  vs.  Hapag Lloyd AG

UNITED UTILITIES

Risk-Adjusted Performance

Very Weak

Over the last 90 days UNITED UTILITIES GR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Hapag Lloyd AG

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hapag Lloyd AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady 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 Hapag-Lloyd

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

The idea behind UNITED UTILITIES GR and Hapag Lloyd 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.