Correlation Between UNITED UTILITIES and Realty Income

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

Diversification Opportunities for UNITED UTILITIES and Realty Income

-0.15

Correlation Coefficient

UNITED UTILITIES  Realty Income

Good diversification

The 3 months correlation between UNITED and Realty is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding UNITED UTILITIES GR and Realty Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Realty Income 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 Realty Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Realty Income has no effect on the direction of UNITED UTILITIES i.e., UNITED UTILITIES and Realty Income go up and down completely randomly.

Pair Corralation between UNITED UTILITIES and Realty Income

Assuming the 90 days trading horizon UNITED UTILITIES GR is expected to generate 1.14 times more return on investment than Realty Income. However, UNITED UTILITIES is 1.14 times more volatile than Realty Income. It trades about 0.09 of its potential returns per unit of risk. Realty Income is currently generating about -0.09 per unit of risk. If you would invest  1,175  in UNITED UTILITIES GR on October 8, 2024 and sell it today you would earn a total of  75.00  from holding UNITED UTILITIES GR or generate 6.38% return on investment over 90 days.

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

UNITED UTILITIES GR  vs.  Realty Income

UNITED UTILITIES

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in UNITED UTILITIES GR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, UNITED UTILITIES may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Realty Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Realty Income 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 Realty Income

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

The idea behind UNITED UTILITIES GR and Realty Income 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..