Correlation Between United Utilities and Guangdong Investment
Can any of the company-specific risk be diversified away by investing in both United Utilities and Guangdong Investment 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 Guangdong Investment 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 Guangdong Investment Limited, you can compare the effects of market volatilities on United Utilities and Guangdong Investment 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 Guangdong Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and Guangdong Investment.
Diversification Opportunities for United Utilities and Guangdong Investment
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between United and Guangdong is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Guangdong Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Investment 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 Guangdong Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Investment has no effect on the direction of United Utilities i.e., United Utilities and Guangdong Investment go up and down completely randomly.
Pair Corralation between United Utilities and Guangdong Investment
Assuming the 90 days trading horizon United Utilities Group is expected to under-perform the Guangdong Investment. But the stock apears to be less risky and, when comparing its historical volatility, United Utilities Group is 1.2 times less risky than Guangdong Investment. The stock trades about -0.13 of its potential returns per unit of risk. The Guangdong Investment Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 70.00 in Guangdong Investment Limited on December 7, 2024 and sell it today you would earn a total of 1.00 from holding Guangdong Investment Limited or generate 1.43% 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 Group vs. Guangdong Investment Limited
Performance |
Timeline |
United Utilities |
Guangdong Investment |
United Utilities and Guangdong Investment Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with United Utilities and Guangdong Investment
The main advantage of trading using opposite United Utilities and Guangdong Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities position performs unexpectedly, Guangdong Investment 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 Guangdong Investment will offset losses from the drop in Guangdong Investment's long position.United Utilities vs. Globex Mining Enterprises | United Utilities vs. GRIFFIN MINING LTD | United Utilities vs. ANGLO ASIAN MINING | United Utilities vs. Gruppo Mutuionline SpA |
Guangdong Investment vs. HK Electric Investments | Guangdong Investment vs. PRINCIPAL FINANCIAL | Guangdong Investment vs. Japan Asia Investment | Guangdong Investment vs. REGAL ASIAN INVESTMENTS |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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