Correlation Between Federal Realty and United Utilities
Can any of the company-specific risk be diversified away by investing in both Federal Realty 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 Federal Realty and United Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federal Realty Investment and United Utilities Group, you can compare the effects of market volatilities on Federal Realty 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 Federal Realty with a short position of United Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Realty and United Utilities.
Diversification Opportunities for Federal Realty and United Utilities
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Federal and United is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Federal Realty Investment and United Utilities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Utilities and Federal Realty 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 Federal Realty Investment 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 Federal Realty i.e., Federal Realty and United Utilities go up and down completely randomly.
Pair Corralation between Federal Realty and United Utilities
Assuming the 90 days trading horizon Federal Realty Investment is expected to under-perform the United Utilities. But the stock apears to be less risky and, when comparing its historical volatility, Federal Realty Investment is 1.46 times less risky than United Utilities. The stock trades about -0.02 of its potential returns per unit of risk. The United Utilities Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 103,992 in United Utilities Group on September 16, 2024 and sell it today you would earn a total of 4,208 from holding United Utilities Group or generate 4.05% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 98.48% |
Values | Daily Returns |
Federal Realty Investment vs. United Utilities Group
Performance |
Timeline |
Federal Realty Investment |
United Utilities |
Federal Realty and United Utilities Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Federal Realty and United Utilities
The main advantage of trading using opposite Federal Realty and United Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Realty 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.Federal Realty vs. Samsung Electronics Co | ||
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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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