Correlation Between BII Railway and UNITED UTILITIES

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

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

Diversification Opportunities for BII Railway and UNITED UTILITIES

-0.54

Correlation Coefficient

BII Railway  UNITED UTILITIES

Excellent diversification

The 3 months correlation between BII and UNITED is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding BII Railway Transportation and UNITED UTILITIES GR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITED UTILITIES and BII Railway 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 BII Railway Transportation 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 BII Railway i.e., BII Railway and UNITED UTILITIES go up and down completely randomly.

Pair Corralation between BII Railway and UNITED UTILITIES

Assuming the 90 days horizon BII Railway Transportation is expected to under-perform the UNITED UTILITIES. In addition to that, BII Railway is 2.56 times more volatile than UNITED UTILITIES GR. It trades about -0.01 of its total potential returns per unit of risk. UNITED UTILITIES GR is currently generating about 0.01 per unit of volatility. If you would invest  1,234  in UNITED UTILITIES GR on September 28, 2024 and sell it today you would earn a total of  6.00  from holding UNITED UTILITIES GR or generate 0.49% return on investment over 90 days.

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

BII Railway Transportation  vs.  UNITED UTILITIES GR

BII Railway Transpor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BII Railway Transportation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, BII Railway 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

0 of 100

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 comparatively stable basic indicators, UNITED UTILITIES is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with BII Railway and UNITED UTILITIES

The main advantage of trading using opposite BII Railway and UNITED UTILITIES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BII Railway 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 BII Railway Transportation 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.