Correlation Between Utilities Portfolio and Wilmington Broad

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

By analyzing existing cross correlation between Utilities Portfolio Utilities and Wilmington Broad Market, you can compare the effects of market volatilities on Utilities Portfolio and Wilmington Broad 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 Utilities Portfolio with a short position of Wilmington Broad. Check out your portfolio center. Please also check ongoing floating volatility patterns of Utilities Portfolio and Wilmington Broad.

Diversification Opportunities for Utilities Portfolio and Wilmington Broad

-0.51

Correlation Coefficient

Utilities Portfolio  Wilmington Broad

Excellent diversification

The 3 months correlation between Utilities and Wilmington is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Utilities Portfolio Utilities and Wilmington Broad Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilmington Broad Market and Utilities Portfolio 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 Utilities Portfolio Utilities are associated (or correlated) with Wilmington Broad. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilmington Broad Market has no effect on the direction of Utilities Portfolio i.e., Utilities Portfolio and Wilmington Broad go up and down completely randomly.

Pair Corralation between Utilities Portfolio and Wilmington Broad

Assuming the 90 days horizon Utilities Portfolio Utilities is expected to under-perform the Wilmington Broad. In addition to that, Utilities Portfolio is 3.46 times more volatile than Wilmington Broad Market. It trades about -0.05 of its total potential returns per unit of risk. Wilmington Broad Market is currently generating about 0.07 per unit of volatility. If you would invest  888.00  in Wilmington Broad Market on September 12, 2024 and sell it today you would earn a total of  4.00  from holding Wilmington Broad Market or generate 0.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Utilities Portfolio Utilities  vs.  Wilmington Broad Market

Utilities Portfolio

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Utilities Portfolio Utilities are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Utilities Portfolio may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Wilmington Broad Market

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wilmington Broad Market has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong primary indicators, Wilmington Broad is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Utilities Portfolio and Wilmington Broad

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

The idea behind Utilities Portfolio Utilities and Wilmington Broad Market 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.