Correlation Between PT Bank and United Utilities

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

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

Diversification Opportunities for PT Bank and United Utilities

-0.12

Correlation Coefficient

PT Bank  United Utilities

Good diversification

The 3 months correlation between BOZA and United is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Maybank and United Utilities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Utilities and PT Bank 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 PT Bank Maybank 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 PT Bank i.e., PT Bank and United Utilities go up and down completely randomly.

Pair Corralation between PT Bank and United Utilities

Assuming the 90 days trading horizon PT Bank is expected to generate 8.67 times less return on investment than United Utilities. In addition to that, PT Bank is 2.72 times more volatile than United Utilities Group. It trades about 0.01 of its total potential returns per unit of risk. United Utilities Group is currently generating about 0.12 per unit of volatility. If you would invest  1,214  in United Utilities Group on September 5, 2024 and sell it today you would earn a total of  146.00  from holding United Utilities Group or generate 12.03% return on investment over 90 days.

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

PT Bank Maybank  vs.  United Utilities Group

PT Bank Maybank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Maybank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PT Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

United Utilities

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Utilities Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, United Utilities may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PT Bank and United Utilities

The main advantage of trading using opposite PT Bank and United Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Bank 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 PT Bank Maybank 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.