Correlation Between United Utilities and VIVA WINE

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

Diversification Opportunities for United Utilities and VIVA WINE

-0.64

Correlation Coefficient

United Utilities  VIVA WINE

Excellent diversification

The 3 months correlation between United and VIVA is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and VIVA WINE GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VIVA WINE GROUP 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 VIVA WINE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VIVA WINE GROUP has no effect on the direction of United Utilities i.e., United Utilities and VIVA WINE go up and down completely randomly.

Pair Corralation between United Utilities and VIVA WINE

Assuming the 90 days trading horizon United Utilities is expected to generate 6.95 times less return on investment than VIVA WINE. But when comparing it to its historical volatility, United Utilities Group is 3.14 times less risky than VIVA WINE. It trades about 0.02 of its potential returns per unit of risk. VIVA WINE GROUP is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  125.00  in VIVA WINE GROUP on September 30, 2024 and sell it today you would earn a total of  196.00  from holding VIVA WINE GROUP or generate 156.8% return on investment over 90 days.

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

United Utilities Group  vs.  VIVA WINE GROUP

United Utilities

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in United Utilities Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

VIVA WINE GROUP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VIVA WINE GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with United Utilities and VIVA WINE

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

The idea behind United Utilities Group and VIVA WINE GROUP 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.