Correlation Between UNITED UTILITIES and Ibiden CoLtd

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

Diversification Opportunities for UNITED UTILITIES and Ibiden CoLtd

-0.03

Correlation Coefficient

UNITED UTILITIES  Ibiden CoLtd

Good diversification

The 3 months correlation between UNITED and Ibiden is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding UNITED UTILITIES GR and Ibiden CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ibiden CoLtd 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 Ibiden CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ibiden CoLtd has no effect on the direction of UNITED UTILITIES i.e., UNITED UTILITIES and Ibiden CoLtd go up and down completely randomly.

Pair Corralation between UNITED UTILITIES and Ibiden CoLtd

Assuming the 90 days trading horizon UNITED UTILITIES GR is expected to under-perform the Ibiden CoLtd. But the stock apears to be less risky and, when comparing its historical volatility, UNITED UTILITIES GR is 2.13 times less risky than Ibiden CoLtd. The stock trades about -0.06 of its potential returns per unit of risk. The Ibiden CoLtd is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,740  in Ibiden CoLtd on December 22, 2024 and sell it today you would lose (40.00) from holding Ibiden CoLtd or give up 1.46% of portfolio value over 90 days.

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

UNITED UTILITIES GR  vs.  Ibiden CoLtd

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 comparatively stable basic indicators, UNITED UTILITIES is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Ibiden CoLtd

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ibiden CoLtd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Ibiden CoLtd is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with UNITED UTILITIES and Ibiden CoLtd

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

The idea behind UNITED UTILITIES GR and Ibiden CoLtd 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.