Correlation Between United Utilities and Mühlbauer Holding

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

Diversification Opportunities for United Utilities and Mühlbauer Holding

-0.48

Correlation Coefficient

United Utilities  Mühlbauer Holding

Very good diversification

The 3 months correlation between United and Mühlbauer is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Mhlbauer Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mühlbauer Holding 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 Mühlbauer Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mühlbauer Holding has no effect on the direction of United Utilities i.e., United Utilities and Mühlbauer Holding go up and down completely randomly.

Pair Corralation between United Utilities and Mühlbauer Holding

Assuming the 90 days trading horizon United Utilities Group is expected to under-perform the Mühlbauer Holding. In addition to that, United Utilities is 1.35 times more volatile than Mhlbauer Holding AG. It trades about -0.05 of its total potential returns per unit of risk. Mhlbauer Holding AG is currently generating about 0.09 per unit of volatility. If you would invest  3,900  in Mhlbauer Holding AG on December 24, 2024 and sell it today you would earn a total of  280.00  from holding Mhlbauer Holding AG or generate 7.18% 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.  Mhlbauer Holding AG

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.

Mühlbauer Holding

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mhlbauer Holding AG are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, Mühlbauer Holding may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with United Utilities and Mühlbauer Holding

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

The idea behind United Utilities Group and Mhlbauer Holding AG 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.