Correlation Between United Utilities and Internet Thailand

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

Diversification Opportunities for United Utilities and Internet Thailand

0.6

Correlation Coefficient

United Utilities  Internet Thailand

Poor diversification

The 3 months correlation between United and Internet is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Internet Thailand PCL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Internet Thailand PCL 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 Internet Thailand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Internet Thailand PCL has no effect on the direction of United Utilities i.e., United Utilities and Internet Thailand go up and down completely randomly.

Pair Corralation between United Utilities and Internet Thailand

Assuming the 90 days trading horizon United Utilities Group is expected to generate 0.41 times more return on investment than Internet Thailand. However, United Utilities Group is 2.41 times less risky than Internet Thailand. It trades about -0.05 of its potential returns per unit of risk. Internet Thailand PCL is currently generating about -0.02 per unit of risk. If you would invest  1,260  in United Utilities Group on December 24, 2024 and sell it today you would lose (80.00) from holding United Utilities Group or give up 6.35% 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.  Internet Thailand PCL

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 nearly stable technical and fundamental indicators, United Utilities is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Internet Thailand PCL

Risk-Adjusted Performance

Very Weak

Over the last 90 days Internet Thailand PCL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile 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.

Pair Trading with United Utilities and Internet Thailand

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

The idea behind United Utilities Group and Internet Thailand PCL 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.