Correlation Between UNITED UTILITIES and Strategic Education

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

Diversification Opportunities for UNITED UTILITIES and Strategic Education

0.3

Correlation Coefficient

UNITED UTILITIES  Strategic Education

Weak diversification

The 3 months correlation between UNITED and Strategic is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding UNITED UTILITIES GR and Strategic Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Education 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 Strategic Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Education has no effect on the direction of UNITED UTILITIES i.e., UNITED UTILITIES and Strategic Education go up and down completely randomly.

Pair Corralation between UNITED UTILITIES and Strategic Education

Assuming the 90 days trading horizon UNITED UTILITIES GR is expected to under-perform the Strategic Education. In addition to that, UNITED UTILITIES is 2.07 times more volatile than Strategic Education. It trades about -0.18 of its total potential returns per unit of risk. Strategic Education is currently generating about 0.37 per unit of volatility. If you would invest  8,850  in Strategic Education on October 22, 2024 and sell it today you would earn a total of  500.00  from holding Strategic Education or generate 5.65% return on investment over 90 days.

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

UNITED UTILITIES GR  vs.  Strategic Education

UNITED UTILITIES

Risk-Adjusted Performance

0 of 100

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 uncertain 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.

Strategic Education

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Education are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Strategic Education reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UNITED UTILITIES and Strategic Education

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

The idea behind UNITED UTILITIES GR and Strategic Education 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.