Correlation Between UNITED UTILITIES and LVMH Mot

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

Diversification Opportunities for UNITED UTILITIES and LVMH Mot

-0.42

Correlation Coefficient

UNITED UTILITIES  LVMH Mot

Very good diversification

The 3 months correlation between UNITED and LVMH is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding UNITED UTILITIES GR and LVMH Mot Hennessy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LVMH Mot Hennessy 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 LVMH Mot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LVMH Mot Hennessy has no effect on the direction of UNITED UTILITIES i.e., UNITED UTILITIES and LVMH Mot go up and down completely randomly.

Pair Corralation between UNITED UTILITIES and LVMH Mot

Assuming the 90 days trading horizon UNITED UTILITIES GR is expected to generate 0.74 times more return on investment than LVMH Mot. However, UNITED UTILITIES GR is 1.36 times less risky than LVMH Mot. It trades about 0.05 of its potential returns per unit of risk. LVMH Mot Hennessy is currently generating about -0.04 per unit of risk. If you would invest  1,204  in UNITED UTILITIES GR on October 4, 2024 and sell it today you would earn a total of  46.00  from holding UNITED UTILITIES GR or generate 3.82% return on investment over 90 days.

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

UNITED UTILITIES GR  vs.  LVMH Mot Hennessy

UNITED UTILITIES

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in UNITED UTILITIES GR are ranked lower than 4 (%) 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.

LVMH Mot Hennessy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LVMH Mot Hennessy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, LVMH Mot 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 LVMH Mot

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

The idea behind UNITED UTILITIES GR and LVMH Mot Hennessy 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.