Correlation Between United Utilities and Vanguard Funds

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

Diversification Opportunities for United Utilities and Vanguard Funds

0.79

Correlation Coefficient

United Utilities  Vanguard Funds

Poor diversification

The 3 months correlation between United and Vanguard is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Vanguard Funds Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Funds Public 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 Vanguard Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Funds Public has no effect on the direction of United Utilities i.e., United Utilities and Vanguard Funds go up and down completely randomly.

Pair Corralation between United Utilities and Vanguard Funds

Assuming the 90 days trading horizon United Utilities Group is expected to under-perform the Vanguard Funds. In addition to that, United Utilities is 1.95 times more volatile than Vanguard Funds Public. It trades about -0.08 of its total potential returns per unit of risk. Vanguard Funds Public is currently generating about 0.17 per unit of volatility. If you would invest  10,651  in Vanguard Funds Public on September 21, 2024 and sell it today you would earn a total of  261.00  from holding Vanguard Funds Public or generate 2.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

United Utilities Group  vs.  Vanguard Funds Public

United Utilities

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United Utilities Group are ranked lower than 3 (%) 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.

Vanguard Funds Public

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Funds Public are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Vanguard Funds may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with United Utilities and Vanguard Funds

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

The idea behind United Utilities Group and Vanguard Funds Public 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.