Correlation Between United Utilities and SERI INDUSTRIAL

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

Diversification Opportunities for United Utilities and SERI INDUSTRIAL

0.64

Correlation Coefficient

United Utilities  SERI INDUSTRIAL

Poor diversification

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

Pair Corralation between United Utilities and SERI INDUSTRIAL

Assuming the 90 days trading horizon United Utilities Group is expected to generate 0.46 times more return on investment than SERI INDUSTRIAL. However, United Utilities Group is 2.19 times less risky than SERI INDUSTRIAL. It trades about 0.01 of its potential returns per unit of risk. SERI INDUSTRIAL EO is currently generating about -0.03 per unit of risk. If you would invest  1,136  in United Utilities Group on October 25, 2024 and sell it today you would earn a total of  44.00  from holding United Utilities Group or generate 3.87% return on investment over 90 days.

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

United Utilities Group  vs.  SERI INDUSTRIAL EO

United Utilities

Risk-Adjusted Performance

0 of 100

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.

SERI INDUSTRIAL EO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SERI INDUSTRIAL EO 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 technical indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with United Utilities and SERI INDUSTRIAL

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

The idea behind United Utilities Group and SERI INDUSTRIAL EO 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.