Correlation Between United Utilities and Tigo Energy

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

Diversification Opportunities for United Utilities and Tigo Energy

-0.83
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between United and Tigo is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Tigo Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tigo Energy 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 Tigo Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tigo Energy has no effect on the direction of United Utilities i.e., United Utilities and Tigo Energy go up and down completely randomly.

Pair Corralation between United Utilities and Tigo Energy

Assuming the 90 days horizon United Utilities Group is expected to generate 0.19 times more return on investment than Tigo Energy. However, United Utilities Group is 5.34 times less risky than Tigo Energy. It trades about 0.07 of its potential returns per unit of risk. Tigo Energy is currently generating about -0.11 per unit of risk. If you would invest  1,341  in United Utilities Group on October 7, 2024 and sell it today you would earn a total of  53.00  from holding United Utilities Group or generate 3.95% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

United Utilities Group  vs.  Tigo Energy

 Performance 
       Timeline  
United Utilities 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in United Utilities Group are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, United Utilities is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Tigo Energy 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Tigo Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

United Utilities and Tigo Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with United Utilities and Tigo Energy

The main advantage of trading using opposite United Utilities and Tigo Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities position performs unexpectedly, Tigo 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 Tigo Energy will offset losses from the drop in Tigo Energy's long position.
The idea behind United Utilities Group and Tigo Energy 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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