Correlation Between UNITED UTILITIES and EMPLOYERS HLDGS

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

Diversification Opportunities for UNITED UTILITIES and EMPLOYERS HLDGS

0.5

Correlation Coefficient

UNITED UTILITIES  EMPLOYERS HLDGS

Very weak diversification

The 3 months correlation between UNITED and EMPLOYERS is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding UNITED UTILITIES GR and EMPLOYERS HLDGS DL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMPLOYERS HLDGS DL 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 EMPLOYERS HLDGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMPLOYERS HLDGS DL has no effect on the direction of UNITED UTILITIES i.e., UNITED UTILITIES and EMPLOYERS HLDGS go up and down completely randomly.

Pair Corralation between UNITED UTILITIES and EMPLOYERS HLDGS

Assuming the 90 days trading horizon UNITED UTILITIES GR is expected to under-perform the EMPLOYERS HLDGS. But the stock apears to be less risky and, when comparing its historical volatility, UNITED UTILITIES GR is 1.09 times less risky than EMPLOYERS HLDGS. The stock trades about -0.07 of its potential returns per unit of risk. The EMPLOYERS HLDGS DL is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4,374  in EMPLOYERS HLDGS DL on October 26, 2024 and sell it today you would earn a total of  326.00  from holding EMPLOYERS HLDGS DL or generate 7.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

UNITED UTILITIES GR  vs.  EMPLOYERS HLDGS DL

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.

EMPLOYERS HLDGS DL

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EMPLOYERS HLDGS DL are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, EMPLOYERS HLDGS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with UNITED UTILITIES and EMPLOYERS HLDGS

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

The idea behind UNITED UTILITIES GR and EMPLOYERS HLDGS DL 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.

Check out your portfolio center.

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 CEOs Directory module to screen CEOs from public companies around the world.