Correlation Between CHINA SOUTHN and UNITED UTILITIES

Can any of the company-specific risk be diversified away by investing in both CHINA SOUTHN 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 CHINA SOUTHN and UNITED UTILITIES into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CHINA SOUTHN AIR H and UNITED UTILITIES GR, you can compare the effects of market volatilities on CHINA SOUTHN 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 CHINA SOUTHN with a short position of UNITED UTILITIES. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA SOUTHN and UNITED UTILITIES.

Diversification Opportunities for CHINA SOUTHN and UNITED UTILITIES

0.37

Correlation Coefficient

CHINA SOUTHN  UNITED UTILITIES

Weak diversification

The 3 months correlation between CHINA and UNITED is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding CHINA SOUTHN AIR H and UNITED UTILITIES GR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED UTILITIES and CHINA SOUTHN 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 CHINA SOUTHN AIR H 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 CHINA SOUTHN i.e., CHINA SOUTHN and UNITED UTILITIES go up and down completely randomly.

Pair Corralation between CHINA SOUTHN and UNITED UTILITIES

Assuming the 90 days trading horizon CHINA SOUTHN AIR H is expected to generate 2.0 times more return on investment than UNITED UTILITIES. However, CHINA SOUTHN is 2.0 times more volatile than UNITED UTILITIES GR. It trades about -0.01 of its potential returns per unit of risk. UNITED UTILITIES GR is currently generating about -0.17 per unit of risk. If you would invest  47.00  in CHINA SOUTHN AIR H on December 6, 2024 and sell it today you would lose (2.00) from holding CHINA SOUTHN AIR H or give up 4.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

CHINA SOUTHN AIR H   vs.  UNITED UTILITIES GR

CHINA SOUTHN AIR

Risk-Adjusted Performance

Very Weak

Over the last 90 days CHINA SOUTHN AIR H has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CHINA SOUTHN is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

UNITED UTILITIES

Risk-Adjusted Performance

Very Weak

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

Pair Trading with CHINA SOUTHN and UNITED UTILITIES

The main advantage of trading using opposite CHINA SOUTHN and UNITED UTILITIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA SOUTHN 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's long position.

The idea behind CHINA SOUTHN AIR H and UNITED UTILITIES GR 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.