Correlation Between United Utilities and Antero Midstream

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

Diversification Opportunities for United Utilities and Antero Midstream

0.3

Correlation Coefficient

United Utilities  Antero Midstream

Weak diversification

The 3 months correlation between United and Antero is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Antero Midstream Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Antero Midstream Partners 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 Antero Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Antero Midstream Partners has no effect on the direction of United Utilities i.e., United Utilities and Antero Midstream go up and down completely randomly.

Pair Corralation between United Utilities and Antero Midstream

Assuming the 90 days horizon United Utilities is expected to generate 2.23 times less return on investment than Antero Midstream. In addition to that, United Utilities is 1.43 times more volatile than Antero Midstream Partners. It trades about 0.03 of its total potential returns per unit of risk. Antero Midstream Partners is currently generating about 0.08 per unit of volatility. If you would invest  914.00  in Antero Midstream Partners on September 23, 2024 and sell it today you would earn a total of  587.00  from holding Antero Midstream Partners or generate 64.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	62.17%
Values	Daily Returns

United Utilities Group  vs.  Antero Midstream Partners

United Utilities

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in United Utilities Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, United Utilities may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Antero Midstream Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Antero Midstream Partners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Antero Midstream is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with United Utilities and Antero Midstream

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

The idea behind United Utilities Group and Antero Midstream Partners 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.