Correlation Between United Utilities and Icon Energy

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

Diversification Opportunities for United Utilities and Icon Energy

0.36
  Correlation Coefficient

Weak diversification

The 3 months correlation between United and Icon is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Icon Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icon Energy Corp 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 Icon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icon Energy Corp has no effect on the direction of United Utilities i.e., United Utilities and Icon Energy go up and down completely randomly.

Pair Corralation between United Utilities and Icon Energy

Assuming the 90 days horizon United Utilities Group is expected to generate 0.21 times more return on investment than Icon Energy. However, United Utilities Group is 4.65 times less risky than Icon Energy. It trades about 0.06 of its potential returns per unit of risk. Icon Energy Corp is currently generating about -0.06 per unit of risk. If you would invest  1,292  in United Utilities Group on September 19, 2024 and sell it today you would earn a total of  102.00  from holding United Utilities Group or generate 7.89% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy88.8%
ValuesDaily Returns

United Utilities Group  vs.  Icon Energy Corp

 Performance 
       Timeline  
United Utilities 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
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.
Icon Energy Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Icon Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Icon Energy is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

United Utilities and Icon Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with United Utilities and Icon Energy

The main advantage of trading using opposite United Utilities and Icon Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities position performs unexpectedly, Icon Energy 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 Icon Energy will offset losses from the drop in Icon Energy's long position.
The idea behind United Utilities Group and Icon Energy Corp 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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