Correlation Between Weiss Korea and United Utilities

Can any of the company-specific risk be diversified away by investing in both Weiss Korea and United Utilities 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 Weiss Korea and United Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Weiss Korea Opportunity and United Utilities Group, you can compare the effects of market volatilities on Weiss Korea and United Utilities 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 Weiss Korea with a short position of United Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Weiss Korea and United Utilities.

Diversification Opportunities for Weiss Korea and United Utilities

-0.66

Correlation Coefficient

Weiss Korea  United Utilities

Excellent diversification

The 3 months correlation between Weiss and United is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Weiss Korea Opportunity and United Utilities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Utilities and Weiss Korea 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 Weiss Korea Opportunity are associated (or correlated) with United Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Utilities has no effect on the direction of Weiss Korea i.e., Weiss Korea and United Utilities go up and down completely randomly.

Pair Corralation between Weiss Korea and United Utilities

Assuming the 90 days trading horizon Weiss Korea Opportunity is expected to under-perform the United Utilities. In addition to that, Weiss Korea is 1.04 times more volatile than United Utilities Group. It trades about -0.18 of its total potential returns per unit of risk. United Utilities Group is currently generating about 0.08 per unit of volatility. If you would invest  98,960  in United Utilities Group on October 4, 2024 and sell it today you would earn a total of  6,190  from holding United Utilities Group or generate 6.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Weiss Korea Opportunity  vs.  United Utilities Group

Weiss Korea Opportunity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Weiss Korea Opportunity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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. In spite of rather unsteady basic indicators, United Utilities may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Weiss Korea and United Utilities

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

The idea behind Weiss Korea Opportunity and United Utilities Group 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.