Correlation Between United Utilities and SHIP HEALTHCARE

Can any of the company-specific risk be diversified away by investing in both United Utilities and SHIP HEALTHCARE 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 SHIP HEALTHCARE into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between United Utilities Group and SHIP HEALTHCARE HLDGINC, you can compare the effects of market volatilities on United Utilities and SHIP HEALTHCARE 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 SHIP HEALTHCARE. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and SHIP HEALTHCARE.

Diversification Opportunities for United Utilities and SHIP HEALTHCARE

0.65

Correlation Coefficient

United Utilities  SHIP HEALTHCARE

Poor diversification

The 3 months correlation between United and SHIP is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and SHIP HEALTHCARE HLDGINC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SHIP HEALTHCARE HLDGINC 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 Group are associated (or correlated) with SHIP HEALTHCARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SHIP HEALTHCARE HLDGINC has no effect on the direction of United Utilities i.e., United Utilities and SHIP HEALTHCARE go up and down completely randomly.

Pair Corralation between United Utilities and SHIP HEALTHCARE

Assuming the 90 days trading horizon United Utilities Group is expected to generate 1.4 times more return on investment than SHIP HEALTHCARE. However, United Utilities is 1.4 times more volatile than SHIP HEALTHCARE HLDGINC. It trades about -0.09 of its potential returns per unit of risk. SHIP HEALTHCARE HLDGINC is currently generating about -0.14 per unit of risk. If you would invest  1,340  in United Utilities Group on December 1, 2024 and sell it today you would lose (140.00) from holding United Utilities Group or give up 10.45% of portfolio value over 90 days.

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

United Utilities Group  vs.  SHIP HEALTHCARE HLDGINC

United Utilities

Risk-Adjusted Performance

Very Weak

Over the last 90 days United Utilities Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

SHIP HEALTHCARE HLDGINC

Risk-Adjusted Performance

Very Weak

Over the last 90 days SHIP HEALTHCARE HLDGINC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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 SHIP HEALTHCARE

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

The idea behind United Utilities Group and SHIP HEALTHCARE HLDGINC 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..