Correlation Between United Utilities and Sekisui House

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

Diversification Opportunities for United Utilities and Sekisui House

-0.41

Correlation Coefficient

United Utilities  Sekisui House

Very good diversification

The 3 months correlation between United and Sekisui is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Sekisui House in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sekisui House 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 Sekisui House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sekisui House has no effect on the direction of United Utilities i.e., United Utilities and Sekisui House go up and down completely randomly.

Pair Corralation between United Utilities and Sekisui House

Assuming the 90 days trading horizon United Utilities Group is expected to generate 1.08 times more return on investment than Sekisui House. However, United Utilities is 1.08 times more volatile than Sekisui House. It trades about 0.03 of its potential returns per unit of risk. Sekisui House is currently generating about -0.01 per unit of risk. If you would invest  1,244  in United Utilities Group on September 27, 2024 and sell it today you would earn a total of  16.00  from holding United Utilities Group or generate 1.29% 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.  Sekisui House

United Utilities

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in United Utilities Group are ranked lower than 2 (%) 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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Sekisui House

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sekisui House has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with United Utilities and Sekisui House

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

The idea behind United Utilities Group and Sekisui House 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.